National Savings and Investments – UK’s Extra Source of Funding

National Savings and Investments, formerly called the National Savings Bank is a government run savings bank in the United Kingdom. The aim of the bank is to attract individual savers in the UK to make investments to help fund the government’s activities that exceed the tax payments. The bank attracts savers by offering products with tax free aspects and a complete guarantee from HM Treasury for deposits.

The National Savings and Investments Bank, which was founded in 1861 aims to allow workers to save part of their wages and provide the UK’s government with access to funds for debts. The bank manages, more or less, 72 billion pounds in savings. This is equivalent to 10 % of UK’s savings market and also accounts to 17 % of the national debt. Since the funds from the bank are a comparatively cheaper source for government borrowing of funds, the bank sets its interest rates to not only attract savers but also provide a low cost for the government.

If you try explaining the concept to any regular person, the aim of National Savings and Investments does not seem to be too interesting unless they are part of the government. So how do you explain the large amount of money that the national savings bank holds?

One of the more popular products that National Savings and Investments has, which attracts individuals to save is the premium bond. The value of the bond is a mere one pound and is purchased by the holder and is retained for an unlimited amount of time. There is no interest for the bond but is instead entered into a prize drawing held each month. The grand prize is a whopping 1 million pounds with consolation prizes no less than one thousand pounds. And with the prizes being tax free, how could this not attain great attraction from savers. Though the prize amounts seem to be large, this only actually accounts for 3 % of the bank’s funds.

Some of the other products offered by the National Savings and Investments Bank include savings certificates and savings accounts that are tax free. And with the aforementioned hundred percent guarantees for all deposits, more and more people save money and purchase bonds. And with the increasing number of people making investments, this aids the government of the United Kingdom by having a national savings fund to help pay for activities and debt… For the US example?