Index-linked Savings Certificates

Charity_Dalek

Given the thought that interest rates could fall to 0%, just wondered what the views were on Index-linked Savings Certificates.

RayWolfe

Well, the current 1% ain't terrible in today's climate but you have to factor in that inflation may be zero or less this time next year but probably not after 3 or 5 years.
I still think there is a place for them as part of an investment/savings portfolio, particularly for tax payers.

GooeyBlob

Historically, these have always represented a good investment for higher-rate taxpayers, and althoough I'm not one of those, my index-linked savings certificates have done very well over the last 3 years - inflation has been quite high during this time. That is no guarantee of future performance though.

It's really down to personal opinion as to whether or not you believe inflation will fall or rise, although the government believes deflation is the biggest risk. However, if the run on the pound continues the cost of imports could rise substantially, and interest rates may need to be increased to support a collapsing currency. Foreign investors don't have much faith in the UK economy largely because of the level of debt here - which is increasing daily with each government announcement it seems.

In the current turmoil, I would not like to predict which way things will go. It's a tough call, and nobody can really make it for you.