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Autumn Statement: NS&I to the rescue!

The chancellor had little to offer savers although National Savings & Investments emerged as a surprise winner of the mini-Budget.

 
Autumn Statement: NS&I to the rescue!

NS&I, the state-owned savings institution, is in favour with the chancellor after a rise in the cost of borrowing money on government bond markets.

In his Autumn Statement George Osborne said NS&I, the well-known provider of premium bonds, was forecast to supply the Exchequer with £3.5 billion in financing in the current tax year.

This is a leap from zero forecast only last March in the Budget.

NS&I's financial contribution has shot up because savers have continued to buy its bonds and ISAs even though it has cut interest rates to the bone.

Such is the appalling state of the savings market that NS&I income bonds (1.25% gross, pre-tax interest) and direct ISA (1.75% gross) remain popular.

With money pouring in from savers while it pays less on interest, the Treasury has found NS&I is a cheaper source of funding than the gilt, or government bond markets, where interest rates – or yields – have risen this year.

NS&I reckons it will deliver around £350 million of savings to taxpayers as a result.

So even though you are getting a rotten return on your money, rejoice, you are contributing to the nation’s coffers!

According to NS&I, people must be saving more, despite the pitiful rates on cash. Chief executive Jane Platt said her agency’s share of the savings market had fallen to all-time low of 7.2%, meaning private sector providers are not losing out.

No justice for child trust funds

Given the government wants people to work for longer before claiming their state pension it was a shame there was not a bit more to encourage savers and investors, however.

The annual amount you can put in an ISA (individual savings account) has, as expected, been raised to £11,880 for 2014/15. Up to £5,940 of that can go in a cash ISA.

In a nod to retail bond investors the chancellor is cosidering allowing bonds with less than five years to maturity to be held in an ISA.

The chancellor also promised a new tax relief for investments in social enterprise, which will boost the sale of new social impact bonds from next April.

And in a boost to the investment industry Osborne said he would scrap stamp duty on exchange traded funds in a bid to get more of them to operate in the UK rather than Ireland and Luxembourg.

But the chancellor did nothing to remedy the injustice to the more than 6 million children with money stuck in child trust funds. CTFs have been in decline since the launch of junior ISAs which offer better rates and more investment options.

The government announced it was considering allowing people to transfer money from CTFs to junior ISAs (where the annual subscription limit will rise to £3,840 from £3,720). However, nothing further has been said since consultation on the topic ended in August.

Let's hope the chancellor does something about that in the next Budget if he wants the young to learn the savings habit.

14 comments so far. Why not have your say?

John McCarthy

Dec 05, 2013 at 15:48

Is that a typo £5940? I know there was an article on CW debating the final amount but surely the total is half in cash? £11,800/2 = £5900. Early CW bonus for its readers with $0 shelter from the taxman or a false alarm?

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James Mac

Dec 05, 2013 at 16:29

I think the typo is actually in the £11,800 figure as other sources have reported this as £11,880

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Roger Savage

Dec 05, 2013 at 20:03

"So even though you are getting a rotten return on your money, rejoice, you are contributing to the nation’s coffers!"

Amusing, that is not...

This government loathes savers anyway - they pander to feckless wasters at every possible opportunity and perpetuate more cheap, easy credit than at any time in history.

Savers should stage an organised bank run.

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Roger Savage

Dec 05, 2013 at 20:03

"So even though you are getting a rotten return on your money, rejoice, you are contributing to the nation’s coffers!"

Amusing, that is not...

This government loathes savers anyway - they pander to feckless wasters at every possible opportunity and perpetuate more cheap, easy credit than at any time in history.

Savers should stage an organised bank run.

report this

Philmoco

Dec 05, 2013 at 21:27

Why this fixation on cash?

Why not invest in S&S ISA?

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andy

Dec 07, 2013 at 21:24

Why this fixation on cash?

Maybe because so many other people are moving from cash ISA to S&S ISA it is now time to move to cash.

Be fearful when others are greedy ....

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Philmoco

Dec 07, 2013 at 21:46

Ha!

Too late - interest rates dropped in late noughties! Should have swapped to S&S ISA then - S&S have been rising ever since!

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Alan Tonks

Dec 08, 2013 at 11:21

Well said Roger!!!

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sjd

Dec 08, 2013 at 11:59

Once again George has ignored savers this and the last Government just what the prudent to spend spend to fuel a consummation led recovery, and is then topped by the announcement that MP's are to get a 11% pay rise. Just what planet are the politicians live on. MP's should be show restraint and join the real world but that's just wishful thinking their noses are so deep in the gravy train there never going to think about Mr & Mrs average. Sham on them!

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Philmoco

Dec 08, 2013 at 12:37

sjd

Nail on head!

GO is morphing more like GB every time he opens his mouth!

Although he doesn't come across well to many people, Vince Cable is the only one in the house with any financial sense!

We still need discipline to drive both personal and national debt down, including pruning and raising efficiency of public services - most just extract the urine!

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Graham D-C

Dec 09, 2013 at 10:20

Pray for a big jump in inflation and employment which will force the BoE to put up interest rates.

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Philmoco

Dec 09, 2013 at 12:36

Not on your nelly GDC!

That just erodes liquid capital, promotes price churn, price confusion, of which sellers take unfair advantage, and creates pointless jobs for jobsworths and financial hangers-on.

Zero inflation far better for stability and highlights unfounded, greedy pay increase claims and price hikes!

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Cockney Dave

Dec 09, 2013 at 15:59

I have just to an email stating the following with regards to the NSI ISA

We're writing to advise you of a reduction to the interest rate on our Direct ISA, which will affect you if you have one of these accounts.

NS&I account Direct ISA

New lower rate from 27 February 2014

£1+

1.75% AER (Current)

1.50% AER (Reducing to)

Kind of insults this tread really

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Cockney Dave

Dec 09, 2013 at 16:00

Ops, i meant Thread

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