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How to get the best out of a National Savings account

The main attraction of a National Savings (nsandi.com) account is security. Because your savings are 100% backed by the UK treasury, you don't have to wake up in a cold sweat worrying about losing it all in the next financial meltdown. Apart from safety considerations, there may be other advantages to National Savings.

For substantial returns on a National Savings investment, you really need to snap up an index-linked Savings Certificate. These are popular and only available for limited periods, so it is best to register at the website for updates. Act quickly when the certificates are issued, to make sure you take advantage of this inflation-beating investment opportunity.

National Savings accounts, available online or at the Post Office (postoffice.co.uk) offer basic savings at somewhat unattractive rates of interest. Their Investment account pays between 0.2 and 0.3% interest, while the Easy Access account pays between 0.3 and 0.7% interest. Rates are subject to fluctuation, but are hardly competitive.

Nobody is going to get rich that way, so it's worth looking at their online and ISA options. The Direct Saver, which can be operated online or by phone, pays 1.75% while a Direct ISA pays 2.5%.

Even a cursory glance at a comparison site like thisismoney.co.uk shows that there are better rates on offer in the high street. The indications are that National Savings are for those who are looking to avoid the major banks or building societies, or for whom security is paramount.

With up to £85,000 of investments in a bank guaranteed by the Financial Services Compensation Scheme (fscs.org.uk), it might make sense to invest anything above that with National Savings, although spreading your money around a number of institutions would also be an effective precaution.

For those looking for an element of excitement from their National Savings investments, Premium Bonds are the obvious answer. Your money is safe, but there is always the chance that you will win a life-saving sum. It's worth the thrill of opening the envelope and dreaming of a million, even when it turns out to be the same old £25 win once again.

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