In the Chancellor's hands

National Savings offer some of the safest investments around. Abigail Montrose gives the details for people looking for a government home for their money

If you have never thought of Ken Clarke as your friendly bank manager, now may be the time to do so - because for people who are looking for a safe, tax-efficient home for their money, National Savings offer some of the best deals around. Like Tessas (tax-exempt special savings accounts) offered by banks and building societies - which also benefit from tax concessions by the Chancellor - they are a suitable home for your savings over five years or more.

The first National Savings Certificates were issued by the government in 1916 to raise money for World War I. National Savings now operate a whole range of savings schemes - many of which are entirely tax free. Added to this, you can be sure that your savings will be safe, since you are effectively banking with the Government.

National Savings offer three tax-free savings schemes: Fixed-Interest Savings Certificates, Index-Linked Savings Certificates and Children's Bonus Bonds. These schemes are usually best compared with Tessas, as they are all five-year tax-free savings schemes.

l Fixed Interest Savings Certificates guarantee to pay out a fixed rate of interest, equivalent to 5.35 per cent a year, as long as you keep them for five years. There is no tax to pay on the interest, but if you cash in the certificates early you will receive a reduced rate of interest.

The minimum investment is pounds 100 and the maximum is pounds 10,000, or pounds 20,000 from earlier Certificates which have now matured.

l Index-Linked Savings Certificates are suitable for people who are looking to ensure that their savings are proof against inflation. As long as you keep the certificates for the full five-year term, your savings will rise in line with inflation, and by an additional 2.5 per cent a year. The interest on your savings is tax free.

The minimum and maximum investment levels are the same as with Fixed- Interest Savings Certificates.

l Children's Bonus Bonds: These can be bought by anyone over 16, for children under 16. The bonds pay a set rate of interest for every five- year period they are held, up until the child's 21st birthday.

The current issue of bonds guarantees to pay 6.75 per cent a year tax- free for the next five years. The bonds must be held for the full five- year period if they are to receive the guaranteed rate, and the interest is received only when the bond is cashed in.

The minimum amount that can be invested in Children's Bonds is pounds 25, and the maximum holding in any issue is pounds 1,000.

l Tessas are issued by banks and building societies, and you can hold only one at a time. You can invest up to pounds 9,000 over five years in your first Tessa, but if you have already had one Tessa, which has now matured, you can invest all the money from it in a second one - so long as no more than six months elapses between the first one maturing and your investing the proceeds in a follow-up account.

Most Tessas pay a variable rate of interest, but there are a number of fixed-rate ones around. If you want to know exactly how much interest you are going to earn over the account's five-year term, then you may prefer to put your savings into a fixed-rate Tessa.

The general view at present is that interest rates will rise over the next five years, and so most banks and building societies are offering variable-rate Tessas. But some of the fixed-rate offers are still attractive.

So when are National Savings better than Tessas? Well that depends on what you want from your investments. If your main objective is to ensure that your savings keep up with inflation, perhaps because you are retired and on a set income, then Index-Linked National Savings Certificates are for you. Inflation may be low at present, but in the days when it soared to 15 per cent and more, these types of certificate were unbeatable.

If you are just looking for your savings to grow, and do not want to take any risks, then Tessas or National Savings Certificates are both appropriate.

If you are looking to set up a savings scheme for a child, then Children's Bonus Bonds offer better value than Savings Certificates.

You also need to look at how much you want to save. The limits on Children's Bonus Bonds and Tessas are relatively low, so you may find that once you have used up your allowances on these you have money left over and will need to invest the rest of your savings elsewhere.

In that case, index-linked or fixed rate Savings Certificates may be the answer

Start your day with The Independent, sign up for daily news emails
Suggested Topics
Have you tried new the Independent Digital Edition apps?
Arts and Entertainment
Film director Martin Scorsese
Life and Style

The party's potential nominations read like a high school race for student body president

A mother and her child
The veterans Mark Hayward, Hugh Thompson and Sean Staines (back) with Grayson Perry (front left) and Evgeny Lebedev
charity appealMaverick artist Grayson Perry backs our campaign
Arts and Entertainment
Cold case: Aaron McCusker and Christopher Eccleston in ‘Fortitude’
tvReview: Sky Atlantic's ambitious new series Fortitude has begun with a feature-length special
Three people wearing masks depicting Ed Miliband, David Cameron and Nick Clegg
voicesPolitics is in the gutter – but there is an alternative, says Nigel Farage
Chelsea manager Jose Mourinho
footballI have never seen the point of lambasting the fourth official, writes Paul Scholes
Life and Style
Vote green: Benoit Berenger at The Duke of Cambridge in London's Islington
food + drinkBanishes thoughts of soggy school dinners and turn over a new leaf
Finacial products from our partners
Property search
The new rules will come into effect on 6 April

Pension firms must ask consumers more questions, says City Watchdog

Companies will be required to ask about health and lifestyle choices or marital status, to protect consumers who do not take up the government’s offer of the Pension Wise guidance guarantee service

Simon Read: Frozen in time - the expat British pensioners who deserve a better deal

I had dinner with the pensions minister Steve Webb this week. There was a wide-ranging discussion about the new pensions freedoms starting in April, and changes to the state pension. Crucially, I also got to ask Mr Webb whether he had any plans to have another look at the injustice that is frozen pensions.

Number of serially under-performing investment funds has increased by a fifth, survey reveals

The new Spot the Dog survey shows that even famous fund managers, holding billions of pounds of our money, can make mistakes

Mark Dampier: We always bring down Britain. But there's plenty in the tank

While the health of the economy is not insignificant, Mark Dampier finds it incredibly unpredictable in terms of its impact on the stock market

If you haven’t switched supplier or tariff in the last 12 months then you could almost certainly save money by doing so

There are easier ways to save hundreds on your energy bills

A new free app is aimed at the three-fifths of Brits who have never switched supplier

Worse hit are loyal customers with long-standing accounts – their loyalty is rewarded with lower interest rates than more recently-launched accounts

Savers are being let down by banks and building societies, says Financial Conduct Authority

Regulator’s investigation into the market found that around £160bn was held in easy access savings accounts that pay interest lower or equal to BoE base rate

What to do if you're facing repossession: However far you fall, you're not on your own

Helen Fisher had to become a 24-hour carer, and then she faced repossession. But going to the right places for help changed everything, writes Simon Read

Simon Read: Information is power. And it's in the wrong hands when people are cold-called by companies that know they're in debt

In debt? You're likely to be targeted by unscrupulous companies that hope to profit from your misfortune. They may try to pretend to be your friend by offering what they call "help" – but almost certainly that help will come with a cost and leave you worse off than you were before they got in touch.

Mark Dampier: So you've got pension freedom... will it end up as a cold shower?

In less than three months' time radical changes to pensions will take effect, providing investors with more freedom. Yet for those who prefer to make their own investment decisions, the choice of funds available is overwhelming. And an income drawdown account is also not particularly easy to manage.

The move marks the culmination of a long campaign by debt charities and insolvency firms and follows a call for evidence launched by the Minister last August

Bankruptcy rules to change, Business Minister announces

The minimum amount for which you can be forced into bankruptcy is being raised from £750 to £5,000

Three-quarters of parents say being unable to afford to heat their home adequately is hitting the health of their children

Family well-being and health hit by heating costs

A shock report reveals that fuel poverty is affecting desperate families – and their children

Many people have no understanding of pensions

Are you ready for pensions reforms?

Most people are too confused to know how to use their pensions for a secure income

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Product Manager - (Product Marketing, Financial Services)

    £30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

    Recruitment Genius: Compliance Assistant

    £13000 per annum: Recruitment Genius: This Pension Specialist was established ...

    Ashdown Group: Market Research Executive

    £23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

    Recruitment Genius: Technical Report Writer

    £25000 - £35000 per annum: Recruitment Genius: A Technical Report Writer is re...

    Day In a Page

    Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

    Isis hostage crisis

    The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
    Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

    The runaway buccaneers and the ship full of gold

    Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
    Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

    Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

    Maverick artist Grayson Perry backs our campaign
    Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

    Assisted Dying Bill: 'I want control of my life'

    This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
    Move over, kale - cabbage is the new rising star

    Cabbage is king again

    Sophie Morris banishes thoughts of soggy school dinners and turns over a new leaf
    11 best winter skin treats

    Give your moisturiser a helping hand: 11 best winter skin treats

    Get an extra boost of nourishment from one of these hard-working products
    Paul Scholes column: The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him

    Paul Scholes column

    The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
    Frank Warren column: No cigar, but pots of money: here come the Cubans

    Frank Warren's Ringside

    No cigar, but pots of money: here come the Cubans
    Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

    Isis stands strong as its numerous enemies fail to find a common plan to defeat it

    The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
    Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

    Virtual reality: Seeing is believing

    Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
    Homeless Veterans appeal: MP says Coalition ‘not doing enough’

    Homeless Veterans appeal

    MP says Coalition ‘not doing enough’ to help
    Larry David, Steve Coogan and other comedians share stories of depression in new documentary

    Comedians share stories of depression

    The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
    Has The Archers lost the plot with it's spicy storylines?

    Has The Archers lost the plot?

    A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
    English Heritage adds 14 post-war office buildings to its protected lists

    14 office buildings added to protected lists

    Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
    Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

    Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

    Scientists unearthed the cranial fragments from Manot Cave in West Galilee