Your money: Mixed fortunes for National Savings

Clifford German on a missed opportunity for a national institution

National Savings, the copper-bottomed government savings institution, is abolishing the pounds 20,000 limit on the maturing certificates which savers can reinvest. The move aims to allow savers who have reached this limit to keep their money with National Savings.

Yet, as for boosting interest rates paid to savers - the critical issue that might permit National Savings to continue winning a large slice of funds - the organisation has passed on the opportunity. This means that a record year for the National Savings movement is ending on a low note. In the 11 months since last April the net amount invested in National Savings has risen by pounds 4.7bn, more than 50 per cent above the original target set by the Chancellor, Kenneth Clarke, in November 1995. It exceeds even the revised target of pounds 4.5bn set last November.

But withdrawals exceeded new savings last month by pounds 170m, making February the third worst month this decade, and it needed the addition of pounds 238m- worth of interest to make a positive contribution to the amount invested. With only a month of the financial year to run and the target already reached, there is no sign of panic at the Treasury. But it is not surprising that the target for 1997-98 just announced is back down to pounds 3bn again, and even this may be unrealistic if the factors at work last month persist far into the next financial year.

Only the two best-selling products, Pensioners' Bonds and Premium Bonds, attracted more new money than was redeemed in February, and there was a net outflow of pounds 230m-worth of Savings Certificates. New investment in Premium Bonds amounted to pounds 255m last October, following the introduction of the pounds 1m prize, but in February new sales were only pounds 200m and redemptions were pounds 100m, and the product is presumably feeling some extra heat from its nearest competitor, the National Lottery.

Camelot's mid-week draw began last month and so far seems to have attracted about pounds 25m a week. Saturday lottery sales have slipped from pounds 68m to pounds 60m, but the mid-week draw has increased the total amount staked on the lottery, including Instants, from pounds 85m to pounds 100m a week

Pensioners' Bonds are rarely redeemed until the holder dies, but new sales slipped away after the rush when the qualifying age was lowered from 65 to 60 in the 1995 Budget.

Savings Certificates are also suffering. The maximum investment in the 36th issue, earnings 6.5 per cent tax-free, was doubled to pounds 10,000 in November 1991, attracting a surge of new money. Those extra sales have now started reaching maturity and the interest rate will drop to only 3.51 per cent if savers do not redeem their certificates and reinvest. Redemptions may have peaked in February, but there is still about pounds 800m more to be redeemed.

Savings certificates are still the biggest single item in the National Savings portfolio, accounting for pounds 11bn of the total pounds 61bn invested. But in the first 11 months of the current year redemptions exceeded new sales by pounds 665m. excluding interest.

The 44th issue of Savings Certificates will earn 5.35 per cent tax-free fixed for five years, which is better than most bank and building society accounts can earn, but is less than fixed rate Tessas, which offer up to 7.5 per cent tax-free. It looks as if a new issue of savings certificates may be required to sustain demand if interest rates go up again, as most investors now expect them to do after the election.

The current 43rd issue of savings certificates and the ninth issue of index-linked certificates will also be withdrawn at the end of the month, to be replaced by a new 44th and 10th issues from next Tuesday. But this is a technical change to allow holders of Ulster Savings certificates, being withdrawn from sale this month, to reinvest in National Savings. The rates of interest on the new issues will be the same as the ones they replace, and the maximum holding in the new issues will remain at pounds 10,000 each.

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
Finacial products from our partners
Property search

Don't ignore the retirement warning - boost your pension

Nearly two-thirds of people aged over 45 haven't checked the performance of their pension, meaning around 10 million retirement savings schemes are at risk of underperforming

Swim against the tide: a country in the midst of a financial crisis, like Greece, may offer investment opportunities

History tells investors to keep their nerve when headlines scream 'crisis'

Swim against the tide: a country in the midst of a financial crisis, like Greece, may offer investment opportunities

Questions of Cash: 'I want a refund on my TV licence payments but they've turned my claim into a soap opera'

An Independent reader was told to send bank statements to prove payment

Santander's Kitti app aims to bring the good old cash kitty into the 21st century

The days of phoning round to chase up multiple contributions could well be a thing of the past

Once bitten? Research shows that, in 19 out of 20 cases, desperate people are introduced to loan sharks by relatives or friends

How to avoid loan sharks: The alternatives for people who need credit fast

Simon Read meets a woman who became trapped in a cycle of debt

Profiteering? British Gas customers hit again as energy giant fails to pass on profits hike

The company made £63 a second but is only passing on £37 a year cuts to customers

China's stock market has tanked in the last month, losing 30 per cent of its value

China's stock market crash, Greece crisis: how do they affect your finances?

Video: Tom Stevenson, investment director at Fidelity Worldwide Investments, says it’s good to be aware of what’s going on in the world

Payday lender Cash Genie forced to repay £20m to ripped-off customers

The high-cost credit company preyed on vulnerable people struggling because of the recession

Mark Carney warns that the decision is likely to come into 'sharper relief' by 'the turn of the year'

An interest rate rise may be on the way - act now to secure a better mortgage deal

Competition has driven rates down but they could start drifting upwards

Santander 123 is attractive for those seeking interest on credit balances

Switching your current account? Pick one that reflects the way you run your finances

Andrew Hagger has carried out some research to try to establish which accounts are strongest in each of the different areas

A reader hit trouble after booking accommodation in a St Andrews hostel for the Open

Questions of Cash: 'Golfing break landed in the bunker when the price on the booking site was way below par'

One reader encountered a problem when booking accommodation at the St Andrews Tourist Hostel through HostelBookers

The Money Shop this week became the latest payday lender to have an ad banned

Payday lenders slammed for 'misleading' claims: charities say they're still not doing enough to help borrowers

Debt charities say there seems scant evidence to back up CFA's latest report

The crooks, like these in the 1955 film The Ladykillers, are waiting in the shadows as people cash in their savings

Savers are embracing their pension freedom ... and so are the scammers

There have been fresh warnings that scammers are trying to trick people into using liberated cash to invest in dodgy schemes

Don't get burnt: holidaymakers should check their plastic

How to avoid costly debit or credit card charges on overseas trips

Taking the wrong plastic can be a costly mistake, leaving you paying over the odds for your holiday spending money to the tune of £68, maybe more

From as far back as the Seventies, women have been drawn to the tables, attracted by the sense of feeling like a celebrity

Gambling is on the rise - so is enough being done to combat problem betting?

More and more of the 'AB' classes are joining the vulnerable in playing the odds, as Neasa MacErlean reports
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Guru Careers: Tax Manager / Accountant

    £35 - £50k DOE: Guru Careers: A Tax Manager / Accountant (ACA / CA / CTA) is n...

    Ashdown Group: Contracts Executive - City of London

    £35000 - £37000 per annum + benefits: Ashdown Group: Contracts Executive - Cit...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £45K: SThree: SThree Group have been well esta...

    Recruitment Genius: Call Centre Debt Collector - Multiple Roles

    £21000 per annum: Recruitment Genius: This is an exciting opportunity to join ...

    Day In a Page

    Giants Club: After wholesale butchery of Idi Amin's regime, Uganda’s giants flourish once again

    Uganda's giants are flourishing once again

    After the wholesale butchery of Idi Amin's regime, elephant populations are finally recovering
    The London: After 350 years, the riddle of Britain's exploding fleet is finally solved

    After 350 years, the riddle of Britain's exploding fleet is finally solved

    Archaeologists will recover a crucial item from the wreck of the London which could help shed more light on what happened in the vessel's final seconds
    Airbus has patented a jet that could fly from London to New York in one hour

    Airbus has patented a jet that could fly from London to New York in one hour

    The invention involves turbojets and ramjets - a type of jet engine - and a rocket motor
    10 best sun creams for kids

    10 best sun creams for kids

    Protect delicate and sensitive skin with products specially formulated for little ones
    Tate Sensorium: New exhibition at Tate Britain invites art lovers to taste, smell and hear art

    Tate Sensorium

    New exhibition at Tate Britain invites art lovers to taste, smell and hear art
    Ashes 2015: Nice guy Steven Finn is making up for lost time – and quickly

    Nice guy Finn is making up for lost time – and quickly

    He was man-of-the-match in the third Test following his recall to the England side
    Ashes 2015: Remember Ashton Agar? The No 11 that nearly toppled England

    Remember Ashton Agar?

    The No 11 that nearly toppled England
    Turkey-Kurdish conflict: Obama's deal with Ankara is a betrayal of Syrian Kurds and may not even weaken Isis

    US betrayal of old ally brings limited reward

    Since the accord, the Turks have only waged war on Kurds while no US bomber has used Incirlik airbase, says Patrick Cockburn
    VIPs gather for opening of second Suez Canal - but doubts linger over security

    'A gift from Egypt to the rest of the world'

    VIPs gather for opening of second Suez Canal - but is it really needed?
    Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

    Jeremy Corbyn dresses abysmally. That's a great thing because it's genuine

    Fashion editor, Alexander Fury, applauds a man who clearly has more important things on his mind
    The male menopause and intimations of mortality

    Aches, pains and an inkling of mortality

    So the male menopause is real, they say, but what would the Victorians, 'old' at 30, think of that, asks DJ Taylor
    Man Booker Prize 2015: Anna Smaill - How can I possibly be on the list with these writers I have idolised?

    'How can I possibly be on the list with these writers I have idolised?'

    Man Booker Prize nominee Anna Smaill on the rise of Kiwi lit
    Bettany Hughes interview: The historian on how Socrates would have solved Greece's problems

    Bettany Hughes interview

    The historian on how Socrates would have solved Greece's problems
    Art of the state: Pyongyang propaganda posters to be exhibited in China

    Art of the state

    Pyongyang propaganda posters to be exhibited in China
    Mildreds and Vanilla Black have given vegetarian food a makeover in new cookbooks

    Vegetarian food gets a makeover

    Long-time vegetarian Holly Williams tries to recreate some of the inventive recipes in Mildreds and Vanilla Black's new cookbooks