Glossary · UK
What is National Savings Certificates?
Fixed-term savings products issued by NS&I where the return is entirely tax-free, historically including Index-linked Certificates tracking inflation, though new issues are currently unavailable to the general public.
Full Definition
National Savings Certificates are a category of fixed-term savings product issued by National Savings and Investments (NS&I), the government-backed savings organisation, under which the interest or, in the case of Index-linked Savings Certificates, the inflation-linked return, is completely exempt from both Income Tax and Capital Gains Tax. Because NS&I is backed by the UK government (via HM Treasury), capital held in savings certificates is 100% secure with no upper limit on the government guarantee, unlike bank and building society deposits, which are only protected up to 85,000 pounds per person per institution under the Financial Services Compensation Scheme. Index-linked Savings Certificates, the best-known variant, paid a return linked to the Retail Prices Index (RPI) plus a small fixed rate on top, over terms typically of two, three, or five years, making them historically popular with taxpayers wanting inflation protection without any tax erosion of the return -- particularly valuable during periods of high inflation, when the tax-free RPI-linked uplift could be worth considerably more, after tax, than an equivalent taxable savings account paying a similar headline rate. Fixed-interest Savings Certificates, a related product, paid a guaranteed fixed rate over the term instead of an inflation-linked one, again entirely tax-free. NS&I withdrew both Index-linked and Fixed-interest Savings Certificates from sale to new customers some years ago, and they are not generally available to open at present, though existing holders can typically renew maturing certificates into a new term of the same product, and NS&I has at times reintroduced limited tranches during periods of high government borrowing need. Because the certificates are no longer on general sale, most savers seeking tax-free returns now rely instead on ISAs, which offer broader accessibility, though savers who already hold National Savings Certificates from an earlier issue should check their maturity date and renewal options carefully, since certificates that mature without being renewed or cashed in usually revert to a much lower, taxable default rate.