8 In developing a prototype methodology to measure value added, Corporate Value Associates used particular gilts as comparators, based on the characteristics of National Savings' fixed and variable rate products. Fixed rate products last for a period of, typically, five years and Corporate Value Associates considered that the value of these funds should be compared to a five-year gilt.
9 National Savings' variable rate products are priced flexibly, typically, on a ninety-day notice period before an investor can withdraw funds without paying a penalty. Most of these products, however, provide funds that are very long lasting. In the retail savings market customers pay, through a lower interest rate, for an option to remove their funds at short notice but in practice they do not exercise this option. For example, Premium Bonds have an average life expectancy of over 13 years and National Savings Investment account would take over five years to empty even if there were no new deposits. Corporate Value Associates considered, therefore, that a five-year floating rate gilt would be the most appropriate comparator. Since 1997, National Savings has undertaken further work to refine the value added methodology first developed by Corporate Value Associates.