A21-year-old from Lanarkshire holding just £400 worth of Premium Bonds last week won £1m, but that is not the reason money is pouring into National Savings & Investments.

The Government's savings arm is the least likely deposit-taker to default, and investors are rushing through its doors in the hope of finding a safe haven.

National Savings & Investments chief executive Jane Platt explains: "NS&I has a long and solid history that makes it a safe and reliable place for savers."

Sales director John Prout confirmed there had been a big increase in deposits over the past few weeks, with half of new money going into Premium Bonds, and the bulk of the rest into index-linked savings certificates. Finally, the easy-access account is seeing some big deposits by individual investors.

"A new phenomenon we are seeing is surprisingly large amounts coming in from individual customers for whom access and security is now paramount," Prout adds.

Not only are NS&I savings backed by the Government, many are tax-free, which makes them attractive to taxpayers, particularly high earners.

Their headline returns may not look exciting, but can start to sparkle when tax is added to the equation. For example, the best returns which can currently be earned in a bank or building society are around 7%. This falls to 4.2% for a higher rate taxpayer after tax, and to 5.6% for a standard rate payer, which scarcely sets the pulse racing, with inflation soaring ahead at 4.8%.

Premium Bonds
These perennial favourite don't actually pay interest, but are a lottery where you play not with your capital but your interest. Bonds are put into a monthly draw and the winners receive their prizes tax-free.

Prout said: "Certainly, the money is coming in because of reasons of uncertainty, but these are always popular with investors looking for an element of fun."

Last month 36,808,246,836 eligible bonds took part in the draw, which paid out more than 1.6 million prizes, worth more than £104m.

NS&I sets an interest rate on the fund, currently 3.4%, but rather than paying it out in interest, this is used for prizes, so you don't lose the initial stake money. Winners are picked at random by a computer affectionately known as Ernie.

Each bond currently has a 22,000-to-one chance of winning each month, so the likelihood of a prize with the minimum £100 purchase is not great. It is important therefore to remember that if you win nothing, your savings could be badly eroded by inflation over time.

However, with a maximum £30,000 holding and average luck you should win 16 prizes annually, roughly equating to that 3.4% tax-free return. This is worth 4.25% before tax to a basic rate taxpayer and 5.67% for a higher rate tax payer.

The bonds can be bought via a post office, by post, over the telephone or over the internet by anyone over 16 with a minimum initial £100 purchase. After that they must be acquired in £50 lots.

They can be bought for children, but only by close relatives such as parents, guardians and grandparents, not uncles and aunts.

Savings certificates
The next big magnet for money is NS&I tax-free savings certificates, with three-quarters of new funds flocking into index-linked savings certificates.

With the Consumer Prices Index running at 4.7% and the Retail Prices Index at 4.8%, no higher rate taxpayers are currently earning enough to stop their savings being eroded by inflation, according to savings experts at Moneyfacts. Similarly, they estimate only 14% of ordinary taxpayers are making a real post-inflation return.

Higher earners require a return from a bank or building society of 7.52%, which doesn't currently exist, or 5.88% for a standard rate taxpayer, just to preserve the value of their nest eggs.

But they can protect their capital with NS&I index-linked savings certificates, paying 1% above RPI, currently returning 5.8% tax-free, worth the equivalent to a higher rate taxpayer of an unbeatable 9.6% and to a standard payer of 7.25%.

There are currently two issues of the certificates: the 18th issue, which ties your money up for three years, and the 45th issue, which is a five-year commitment. You can invest as little as £100 or up to £15,000 in each issue. No index-linking or interest is paid if the certificates are encashed during the first year. However, you can make withdrawals after the first year, in which case both index-linking and interest are added pro rata on a monthly basis.

Those looking for a secure tax-free haven might also consider fixed interest certificates, although the return on these is far from exciting. There is a 44th two-year issue and a 93rd five-year issue, both paying 2.95% tax-free, worth 3.69% to a basic rate taxpayer and 4.92% to higher earners.

Income Bonds
These are popular for paying monthly interest but the return, though paid gross, is taxed.

Investments under £25,000 are currently earning 4.45%, while nest eggs over £25,000 attract 4.7%. The minimum investment is £500 and the maximum £1m.

Guaranteed Bonds
NS&I Guaranteed Growth Bonds fix interest which is rolled up and paid net of tax. Savers can opt for a one-year bond paying 4.2% or three and five-year versions at 4%.

There is an income version where income can be deducted, but the rates are lower, with the one-year bond paying 4.1% and the three and five-year bonds paying 3.9%.

Easy-access savings account
A significant development which illustrates investor nervousness is the large individual deposits coming into NS&I's Easy Access Account, which pays a tiered rate of interest beginning at 1.85% on up to £1,000, rising to 4.4% above £50,000. Interest is paid gross and is taxable.

Other savings offers
NS&I also offers a direct Isa account paying 5.3% available over the internet, and a cash Isa available through the Post Office, paying 4.6%.

Finally, there is a children's bond paying 3.7% tax-free for minimum £25 investments.