NS&I Index Linked Certificates - Move money elsewhere?

bronzemonkey

This time last year I put £15,000 into 3-year and 5-year NS&I Index-Linked Certificates which pay interest at RPI +1.35%

Their online calculator says that the current value of the 3-year certificate is £15,015! A significant fall from where it was earlier in the year when RPI was high. I'm not quite sure how the value can be so low because I thought the +1.35% should have given me a minimum rate of interest.

What have others with money in NS&I done given the drop in RPI? Should I take my money out and put some of it into my cash ISA allowance and the rest into a fixed-rate savings account? It seems to be doing very little if I leave it with NS&I.

What about the 5-year certificate? Impossible to predict the future but what are people's thoughts on this. Thanks

musehead

I'm not sure about your lack of interest, but since RPI is now -0.4% you're getting a better deal relative to RPI than you were before, since the certificates never pay less than 1.35%. You're getting RPI + 1.75% at the moment. For that reason it doesn't make much sense to cash in, as long as your personal inflation follows RPI.

robpitt

If the valuation was after the aniversary you should be get the full first years interest; if not the interest will have been reduced / anihilated by the RPI fall.

bronzemonkey

Right, so the valuation doesn't include the +1.35% until the first-year anniversary is reached.

In terms of interest relative to RPI - yes RPI is -0.4% but I could get 1.5%+ more in interest if it was shifted out of NS&I into a savings account. There is also the temptation to put some money into the stock market given how low it is.

Obviously I'd effectively just get £15,000 back if I cashed in but I'm trying to find out whether there is much merit in moving the money elsewhere or if it is a rash move

Thanks for your comments!

ManAtHome

Just to double-check - are these issues 15 and 42 (they wer the +1.35% ones).

First year interest is lower than 1.35% though - the 3 year gets RPI+1.1% and the 5 year RPI+0.95% (goes up each year and eventually averages out at +1.35%).

[edit] I'm hanging on to mine, could get more short-term, but the issues after 15/42 were pretty grotty rates, so guessing we won't see +1.35% for a while.