Re-investing Index Linked bonds.

whattochoose · 27 March 2016 at 4:36PM

In May, the NS&I index linked bonds (£15000) I took out in May 2011 will mature. No problem there really, but up to now I've been undecided about how to re-invest them. I have an ISA with the Halifax and would norrmally have put my money in there. However, it's a fixed rate ISA paying 2% (maturing in July 2017) and wont accept any further deposits.
So, I was scratching my head about what to do with the funds I'll receive. There is much information and advice on here from very savvy people about stuff like "drip feeding" and investing in short term accounts which pay relatively high rates, but either through laziness or uncertainty I don't really want to go that route.
However, the solution has been staring me in the face. I have a Halifax Reward Account which pays me £5 a month. This account comprises two private pensions paid in (combined about £400 a month) and three direct debits taken out (broadband, phone, TV - gas/electricity utilities - insurance).
This Halifax account seems ideal to fit the requirements of the Santander 123 account. I realise I need to fund it with £500 a month. However, I now receive state pension which is paid into another Halifax account, and I'm sure it will be no problem transferring it so it's paid into the Santander account.
At the beginning of May, I'll be applying for my Reward Account to be transferred from Halifax to the Santander 123 account, hopefully with no problems, and shortly after can re-invest my funds from the index linked bonds, thereby enjoying an interest rate of 3%, as well as getting cashback on my bills.
Feel quite pleased with myself really.

bowlhead99 · 27 March 2016 at 6:29PM

Seems a sensible choice. If you have £15000 you won't find it very difficult to find £500 to put into the account each month. Because you have £15000, which is rather bigger than £500.

The Santander is a decent account. You can get a higher interest rate elsewhere but not in one account on that much money. So it's a good and simple home for the money.

Except: You say you have two Halifax accounts, one which is a reward saver and pays a fiver a month even if its average balance is only a pound. And you're going to close that account which pays a fiver a month, instead of the other one? That seems a waste of a fiver a month. Nothing wrong with having the Santander interest *and* the Halifax reward.

So, instead of being quite pleased with yourself, maybe just feel half pleased with yourself and tweak the plan a bit to make it better.

The index linked savings bonds are a good safe investment which are guaranteed to go up in value with inflation and attract no tax. No other account offers that, and if you cash in your bonds they are not on offer to buy again. This might not be something that bothers you if you can get rates better than inflation for a while and the interest you're likely to make is not enough to pay tax on anyway, at the moment.

kidmugsy · 27 March 2016 at 10:53PM

whattochoose wrote: »

In May, the NS&I index linked bonds (£15000) I took out in May 2011 will mature. No problem there really, but up to now I've been undecided about how to re-invest them. ... I now receive state pension which is paid into another Halifax account

If your health is normal for your age, perhaps the best investment you could make would be to defer your State Pension for a year or two while living off some of the capital in your 123 account. You'll be rewarded with an extra 10.4% on your pension for each year of deferral. No other index-linked investment would come close to that return.

An exception would be if you depend, or might depend, on "benefits", because they can interact with the extra pension to your disadvantage.

Another exception would be if the pension deferred were received tax-free but the future extra pension would attract income tax. So if your three current pensions fall short of the Personal Allowance for income tax, but are close to it, then deferral might not be attractive. Or maybe one year would be enough, or even six months. The calculation is yours to do.

whattochoose · 28 March 2016 at 2:01PM

Thank you for your input and advice.
There is definitely practical sense in what you suggest.
But, while I've considered the points you suggest, I still feel the actions I'll be taking are the best course of action for me at the present time.
Thanks again.

Re-investing Index Linked bonds.

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