Why can't you bank on bonds?

MONEY TALK

A CONSERVATIVE government will privatise the state pension, sell off the Tube and probably much more; now we know that a Labour government would also be looking to clear out the state store-room.

Either way, don't be surprised if National Savings is on the privatisation hit list in some shape or form. National Savings is the organisation behind premium bonds - Britain's better-value lottery, tax-free savings certificates and a range of other savings products sold largely through post offices.

Its products - many of them unique - have collectively proved more popular than Tessas, PEPs and personal pensions put together and have offered some excellent value over the years, while at the same time raising wads of relatively cheap cash for the government.

If financial advisers haven't waxed so lyrical don't be surprised to hear that National Savings doesn't pay commission. So, funnily enough, many advisers have tended to talk about high-rate bonds and the like from just about any other brand. But you can bet that many a financial company might be interested in buying National Savings' brand name and 30 million- strong customer base.

The obvious worry about any privatisation is that the deal for savers would get worse. In fact in the past National Savings has tended to alter its rates less often than the savings market in general, and consequently has sometimes compared well, at other times not so well. Indeed currently, with savings rates generally on the rise, National Savings products have in many cases fallen behind and savers might actually wish for more of a competitive impulse.

In other areas too, a bit of catching up would do no harm. The vast majority of the 350,000 premium bond prizes every month are sent out in cheque form in the post, and hundreds do not get through. A total of pounds 14m of premium bond prizes are currently unclaimed because the winners cannot be traced. National Savings insists that it makes strenuous efforts to ensure that cheques do not fall into the wrong hands and to trace the prizewinners but, nevertheless, does not offer the option of having prizes paid into bank accounts automatically. It cites the cost of offering this direct payment option, even though direct payment is something many of the privatised companies encourage for dividends, presumably because it actually saves them money. Watch this space.