Are NS&I accounts safer than normal savings accounts?

NS&I accounts are provided by the government and backed by the Treasury. Does this make them safer than normal savings accounts? We take a look.

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NS&I (National Savings & Investments) is the government’s own savings brand. But is it safer to save with NS&I rather than a normal savings account? Let’s take a look.

What does NS&I offer?

NS&I offers a range of financial products including an easy-access savings account that allows you to deposit and withdraw funds at will.

NS&I offers an easy access ISA too. It works in the same way but pays interest tax free. See our article on ISA basics to learn more.

NS&I sometimes offers fixed bonds, where you can lock your money away for higher returns. Its Green Bond, set to launch later in 2021, will fall under this category.

If you didn’t already know, NS&I is also home to Premium Bonds. This is a unique product that allows you to win tax-free cash prizes from £25 to £1million, every month. The more bonds you hold, the bigger your chances of winning. That said, the odds of hitting the jackpot are minuscule.

How safe is my money with NS&I?

Regardless of the type of account you open with NS&I, anything you deposit is backed by the Treasury.

This is because when you save with NS&I you are effectively lending your money to the government, so in return, it gives a cast-iron guarantee that your money is safe.

That said, you still need to ensure your account is secure. While NS&I explains on its website that it will refund any money taken out of your account fraudulently, you still need to take ‘reasonable care’ to keep your account safe. Never give out account passwords or share private financial information with anyone.

How does the protection offered differ from normal savings accounts?

With a normal savings account, your deposits are not backed by the Treasury. Instead, your deposit relies on the Financial Services Compensation Scheme (FSCS). The scheme offers a guarantee that if your bank, building society or credit union goes bust, you can claim back your money.

Crucially, however, the FSCS only protects up to £85,000 per financial institution (up to £170,000 for joint accounts). If you have more than £85,000 saved in any one institution, you won’t get the excess back should your financial provider go under.

While the protection offered under the FSCS is sufficient for most, it’s worth knowing that should you ever need to use the scheme, you’ll probably have to wait a while to access your cash.

Also, be mindful that not all savings accounts offered on best buy tables have FSCS protection. This is because FSCS protection only applies to providers with a UK banking licence. While other protection schemes exist, having to deal with another country’s regulator may prove a challenge that is best avoided.

To ensure that your banking provider has FSCS protection, look out for a purple FSCS logo on its website.

Is it possible to lose my money with NS&I?

The cast-iron guarantee backed by the Treasury is unbeatable. This means that everything you save with NS&I will definitely be paid back to you. That said, you’ll have to bear in mind any maximum deposit limits for specific NS&I products.

The only real way you can lose your money in an NS&I account is if UK Plc suffers a catastrophic failure and the country collapses. If this happens, there will probably be bigger problems to contend with.

However, while you won’t physically lose your money with NS&I, the value of your savings can go down if you stash your money in a poor account. That’s because the current rate of inflation is higher than the interest rates offered by some NS&I accounts.

Remember, if your savings don’t keep up with inflation, your money is effectively losing value.

It’s also worth looking at the best easy access savings accounts to give you the best chance of beating the inflation monster.