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NS&I index linked certificate new issue

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  • moneylover
    moneylover Posts: 1,660 Forumite
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    I know that Martin has written about National Savings Certificates although I cannot find a link to his article at the moment.

    I have never invested in these certificates but the Easier Finance article indicates that at the present RPI of 4.8% basic rate taxpayers would need to find a taxable product paying a net rate of 7.68% to match this rate and higher rate tax payers 10.25%. But that is just at this moment in time of course.

    I would be interested to hear what some of the seasoned investors who inhabit this board (and who presumably invest at least some of their money in safe products) feel about this new release of savings certificates given that there are fixed rate savings bonds around for over 6% gross over the whole period of investment chosen. Does it just depend on whether you are a higher rate taxpayer or not as these certificates are perhaps a good bet for anyone paying tax at 40%?

    I looked at the fixed rate national savings certificates but they dont seem very competitive at all.
    Thanks!
  • ManAtHome
    ManAtHome Posts: 8,512 Forumite
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    They were good in the 90s, but really hacked the rates in the "naughties". Really they're attractive at the moment because the Bank or Excess has been keeping interest rates artificially low - whether this can continue without the pound being worth less than a Euro remains to be seen.
  • StevieJ
    StevieJ Posts: 20,174 Forumite
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    G.B. is not normally this generous, a little worrying that the Govt is having to pay between 7.69% - 10.25% to service part of its debt just like a sub-prime borrower.
    'Just think for a moment what a prospect that is. A single market without barriers visible or invisible giving you direct and unhindered access to the purchasing power of over 300 million of the worlds wealthiest and most prosperous people' Margaret Thatcher
  • nilrem_2
    nilrem_2 Posts: 2,188 Forumite
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    In the past I placed a large proportion of my savings in savings certs but gradually withdrew the cash when the rate became uncompetitive, IMHO the normal fixed rate certs are still not very good unless one is paying tax at 40% but due to inflation the indexed linked ones do look attractive ATM and I am considering investing in them again whilst inflation is higher.
  • ED
    ED Posts: 617 Forumite
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    I see the new one is 5-year (Issue 41) offering 1.35% + index-linking (RPI currently 4.80%) TAX FREE.

    It's equivalent to 7.68% for Basic Rate tax payers, 10.25% for Higher Rate.

    The same percentages and 1.35% + index-linking as NS&I ongoing 3-year (Issue 14). Hope this helps folk reading this.

    Anyone have an opinion whether the 5-year one has any snags compared with 3-year?
  • IGK
    IGK Posts: 106 Forumite
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    I have been investing in Index-Linked NSCs for several years, and, while they are not the most exciting investment in the world, they are, IMHO, a very prudent and extremely safe investment to have in your portfolio.
    The range of rates I have seen in recent years on these are between RPI + 0.7% and 1.6%, so 1.35% isn't bad. Needless to say I will be scooping some of these up when the cash becomes available...

    Be aware that past inflation has no bearing on the return on newly purchased certificates, it's what the RPI does from the time of purchase that matters, so if, as some pundits expect, inflation falls later ths year then the return won't be as good as it has been in the last few months.

    I prefer the 5yr over the 3yr as I want the inflation-proofing to be as long-term as possible. I wish there was a 10 or 20 year issue!
  • ashm1
    ashm1 Posts: 234 Forumite
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    This may sound a bit nuts but what happens to the certificates if deflation happens ?
  • nilrem_2
    nilrem_2 Posts: 2,188 Forumite
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    ashm1 wrote: »
    This may sound a bit nuts but what happens to the certificates if deflation happens ?

    Lol thats a good one! :T I imagine in that event you would just receive the fixed interest and no index-linked interest. I would not think they could get away with using a - interest rate! :eek:
  • IGK
    IGK Posts: 106 Forumite
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    ashm1 wrote: »
    This may sound a bit nuts but what happens to the certificates if deflation happens ?

    From the Terms & Conditions:
    11. In the event of a decrease in the Retail Prices Index:
    (a) any maturity value will never be less than the preceding anniversary value, or, in the case of a Certificate with a term of one year, the purchase price, together with interest at the relevant rate for the period from the preceding anniversary date to the maturity date;
    (b) any anniversary value will never be less than the preceding anniversary value or, in the case of the first anniversary, the purchase price, together with interest at the relevant rate for the year.
  • ashm1
    ashm1 Posts: 234 Forumite
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    Thanks. Seem quite useful in deflation situation aswell! (Assuming there would be problems in the banking sector under deflation)
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