SO WHAT is all the fuss about with National Savings? If a hugely-successful businessman such as Alan Sugar raves about them they must be good.

When it comes to savings it makes sense to take advantage of all the tax perks the Government has to offer before considering other investments.

National Savings and Investments is a provider which offers a range of savings accounts and bonds that raise money for the Government and pay the investor interest in return.

Some offer tax-free interest, others are taxable.

Previously known as the Post Office Savings Bank, the scheme was set up in 1861 as a way to encourage workers to save. Today, backed by the Treasury, it is the UK’s second largest savings institution, with more than 30 million customers.

The benefit of being a National Savings investor is that by loaning your capital to the Government you receive security for your investment in return. Interest rates may be fixed, variable or index-linked to the rate of inflation, depending on which type of account you choose.

A quarter of all money invested in National Savings goes into Premium Bonds. Strictly speaking, they are not investments because instead of earning interest, the bonds go into a monthly draw for tax-free prizes.

Many investors see Premium Bonds as a safe alternative to the national lottery because they are only gambling with the interest, not with their capital. The minimum investment is £100 and the prizes range from £50 up to £1m.

The chances of winning are also considerably higher than the lottery, with an estimated one in 24,000 chance of receiving a prize with a single bond in a single draw.

Investors can also withdraw the original capital investment at any time without penalty. However, in recent years the odds of a Premium Bond scooping a prize have lengthened as more bonds have been issued to savers.

National Savings also offers a range of tax-free fixed rate and index-linked bonds. Index-linked bonds promise to pay an interest that is above inflation. In return you agree to keep your money invested for between three and five years.

All money invested in National Savings is capital protected, which means you get all your original investment back. In addition, National Savings children’s bonus bonds are one of the most popular children’s savings accounts in the country, with about 140,000 accounts opened.

If you are considering investing ensure you speak to an independent financial adviser. You can contact National Savings on 0845 964 5000.