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Dec 02
2009
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"Your returns are typically small and aren't guaranteed, so you can't rely on them as a regular source of income.
"You may have to wait months or years before any returns, during which time the value of your money is being eroded by inflation."
Anybody who needs a regular income could consider other National Savings products, such as its guaranteed growth or income bonds.
"They offer a reasonable rate of return and more importantly, a consistent rate of return."
Unfortunately, the popularity of two recent National Savings bond issues - one for 12 months, another for two years - means they were withdrawn within weeks.
Some applicants had deposit cheques returned, and National Savings admitted its sales targets had been met much sooner than it had expected.
At the time of writing, the organisation has yet to launch any replacement deals, but there are some longer-term bonds available.
National Savings' Guaranteed Growth Bonds Issue 42 currently pays a fixed rate of 4.4 per cent a year over three years, but your money will be tied up. Unlike Premium Bonds, this is taxable.
But it is still worth 2.64 per cent to a top-rate taxpayer and 3.52 per cent to a basic-rate taxpayer.
"They won't make you a million but, unlike Premium Bonds, at least you know what you are getting, " Hutton says.