Like the Royal Family, Marmite or Coronation Street, National Savings & Investments (NS&I) is a British institution. Almost 27 million people have savings with the Government-backed organisation - almost half the population. Many of us have an elderly relative who has invested in savings certificates, and we all know about the cash prizes that can be won with Premium Bonds.

However, NS&I offers far more than savings certificates and Premium Bonds. It also offers Isas, easy-access savings accounts, investment accounts and a wide variety of bonds, such as children's bonds and guaranteed growth bonds.

Background

The principles of NS&I have not changed since it was set up by the Government in 1861 as the Post Office Savings Bank. It was designed to offer the public a secure place to save and to provide the Exchequer with a source of funding. The scheme has expanded over the years, but these principles remain at the core of its operation. In 1967 its name was changed to National Savings, although its ties to the Post Office as one of the main distribution channels of NS&I products remain. In 1996 it was given slightly more autonomy from the Government, though it is still accountable to the Treasury.

How to save

BACKGROUND

• The beginner's guide to Child Trust Funds

• National Savings & Investments explained

• How to budget

BACKGROUND

• The beginner's guide to current accounts

• How to reclaim bank charges

• Bonds explained

Related Links

• How to invest for children

• The beginner's guide to Isas

• Where did I stash that cash?

Premium Bonds

By far the most popular product in the NS&I range, Premium Bonds represent 40 per cent of all money held by NS&I.

Introduced in 1956 as "savings with a thrill", the aim of Premium Bonds remains the same today: to encourage people to save with the incentive of the chance to win a cash prize in the monthly draw. Ernie, which stands for electronic random number indicator equipment, was used to generate the first set of winning numbers. More than five decades later, a more up-to-date machine, Ernie 4, handles the task.

There are 23.7 million people holding Premium Bonds. In the past five years more bonds have been sold than in the previous 45 years and the number of monthly prizes has doubled. Almost 1 million cash prizes are awarded each month, worth between £1 and £1 million. The prizes are tax-free.

If you hold Premium Bonds it is worth contacting NS&I to check if you have won anything recently. Alternatively, to find out if you have any NS&I products - or a financial product from another provider - that you might have otherwise forgotten about, go to mylostaccount.org.uk.

Other products

National Savings certificates come in two varieties, but both promise tax-free interest on your initial investment. The fixed income certificate guarantees a fixed amount of interest over a set period of time, currently three or five years. Your interest over the term is compounded year-on-year.

The index-linked certificate returns an interest rate that tracks the retail prices index.

Children's bonus bonds are one of the most popular savings vehicles for children. Parents can invest in a particular bond issue for up to five years at a fixed rate of interest, and the returns are also tax-free.

Other national savings bonds are not tax-free, but they remain extremely popular. There are four types: income bonds, guaranteed income bonds, guaranteed growth bonds and guaranteed equity bonds.

There is also an investment account, which comes with a passbook and is available to anyone over the age of 7, and an easy-access savings account.

It is worth checking interest rates before opening an account because the competitiveness of the gross rates varies between products and over time. You can compare the products with others on the market at comparison websites such as moneyfacts.co.uk and moneysupermarket.com.

Market-leading rates, however, are not really the raison d'etre of NS&I. After the downfall of Northern Rock, millions of savers turned to NS&I because deposits are guaranteed by the Treasury. It is the security provided by this link to the Government that has made NS&I so popular since its inception.

It is worth pointing out, however, that having been effectively nationalised, Northern Rock is actually the only other provider on the market offering the same level of protection as NS&I.

Where are they available?

You can pick up NS&I products from the Post Office, over the phone or online. You can also obtain information about the product range from WH Smith.

Five News Stories

Savers end rush to safety as Premium Bonds take hit

National savers are short-changed

Savers pull £1bn from National Savings

National Savings cuts rates across its range

Banks rob Isa savers of £1bn in tax breaks

Five Features

Northern Rock plan has silver lining for savers

Ten thing to know about children's savings

Where did I stash that cash?

Five shelters for your savings

Ten things you should know about Isas

Five Videos

Classic National Savings Bonds Television Advert

Spot another Classic NS&I Television Advert

ERNIE 1 - The First Premium Bonds Computer

Compound Interest

Martin Lewis on Northern Rock - September 2007

Five Websites

NS&I

Moneyfacts.co.uk

HM Revenue & Customs

Mylostaccount.org.uk

My Egg Nest