National Savings and Investments (NS&I)

National Savings and Investments (NS&I) is a state-owned savings bank in the United Kingdom. Think of it as the UK government's very own bank for the public. It's both a non-ministerial government department and an Executive Agency of the Chancellor of the Exchequer. Its primary mission is to raise cost-effective financing for the government by offering a range of savings and investment products directly to the public. Because it's backed by HM Treasury, any money you place with NS&I is 100% secure, making it one of the safest places for your cash in the UK. This unique position means it doesn't need a banking license and operates outside the standard financial regulations that apply to commercial banks. For savers, NS&I represents the ultimate safe haven, especially during times of economic uncertainty. Its products range from the iconic, lottery-style Premium Bonds to straightforward savings accounts and eco-friendly bonds.

At its core, NS&I is a simple transaction between the UK government and its citizens. When you buy an NS&I product, you are essentially lending money to the government. In return, the government pays you interest or, in the case of Premium Bonds, gives you the chance to win tax-free prizes. The funds raised help finance public services and manage the national debt. This direct link to the state is what sets NS&I apart from every high-street bank.

While banks in the UK are generally very safe, deposits are typically protected by the Financial Services Compensation Scheme (FSCS), which covers up to £85,000 per person, per institution. Similarly, in the US, the Federal Deposit Insurance Corporation (FDIC) insures deposits up to $250,000. NS&I plays in a different league entirely. Since it is the government, your entire deposit is protected, no matter how large. If you have £1 million saved with NS&I, all £1 million is 100% secure. This makes it the Fort Knox of savings accounts, offering a level of security that no private institution can match.

NS&I offers a menu of simple, secure products. While the exact range and rates on offer change over time, some stalwarts are almost always available:

• Premium Bonds: The UK's most beloved savings product. Instead of earning interest, every £1 bond you own is entered into a monthly prize draw. Prizes range from £25 to a life-changing £1 million, and they are all completely tax-free. It's a punt, but one where you can't lose your original stake.
• Direct Saver & Income Bonds: These are NS&I's bread-and-butter savings accounts. They are straightforward, easy-access accounts that pay a variable rate of interest. The Direct Saver adds the interest to your balance, while Income Bonds pay it out monthly to your bank account, which is useful for those seeking a regular income stream.
• Green Savings Bonds: A product for the modern saver. These fixed-term bonds allow you to help fund green government projects, such as offshore wind farms and carbon capture initiatives. It's a way to align your savings with your values, appealing to followers of ESG Investing.

So, where does NS&I fit in a value investor's toolkit? While its products are often marketed as 'investments', a discerning investor should view them primarily as a home for cash.

Value investing is about buying assets for less than their intrinsic worth to generate long-term capital growth. NS&I products, by design, are built for capital preservation. Their returns often struggle to beat inflation, meaning the 'real' purchasing power of your money may decline over time. Therefore, they are not 'investments' in the same way stocks or productive businesses are. Instead, they are best classified as cash equivalents—ultra-safe, highly liquid assets.

Despite not being a growth engine, NS&I plays a vital strategic role for the savvy investor:

• Your Emergency Fund: The unparalleled security makes NS&I an ideal place to park your Emergency Fund. You know the money will be there, in full, when you need it most.
• 'Dry Powder' Reserve: Following the wisdom of investors like Warren Buffett, it's wise to keep some 'dry powder' (cash) on hand to seize opportunities when the market panics. Storing this cash in NS&I means it's completely safe while you wait for the perfect pitch.
• De-risking in Retirement: For those in or nearing retirement, protecting capital becomes paramount. NS&I can be a core holding to reduce overall portfolio risk.

Ultimately, the decision to use NS&I comes down to a trade-off. You might sacrifice a percentage point or two of interest compared to a top-paying commercial bank, but in return, you get absolute, unlimited peace of mind. For a value investor, that's not a bad trade, especially when protecting the cash you need to deploy for your next great investment.