Act now to get best savings % this year - index-linked savings from National Savings

fred101_2

I have just opened an Index-linked savings account with the National Savings

This pays a Tax-Free annual interest rate of Inflation+1%. The inflation measure it uses is the Retail Prices Index (RPI).

RPI is published approx 6-7 weeks in arrears which means the VAT rate increase at the beginning of January will impact the RPI figure published on February 16th. Therefore if you open an account before this date you should benefit from an immediate 2-2.5% inflation increase on your savings.

Added to which RPI also includes mortgage interest payments which most experts predict will also increase later this year.

Taking this into account, it is my belief that there is a potential of at least 3-4% inflation this year, plus don't forget the 1% National Savings give you on top of this. In total, 4-5% tax free and a government backed 100% safe account - and some experts say that inflation could go even higher in the future because of the government debt!!

Now the drawback is that the accounts are for a fixed term of either 3 or 5 years. However, if you hold your account for at least 1 year you can cash them in early and get any interest and indexation for any complete months up until that point. Therefore they are effectively only 1 year fixed term with the flexibility to extend for the whole 3 or 5 year term!!!

You can invest from £100-£15000 per person for each issue (ie 3 or 5yr term). Therefore a couple could invest up to £60,000 between them.

If what I say proves to be incorrect, the easy get-out is that you are allowed to cash in the accounts at any time (although before a year is up and you will just get back your initial deposit)

I am writing this on the forum because I don't understand why no-one on MSE has picked this up yet and shouting about it!

Hope this is useful to anyone who reads this.

Jonbvn

I don't think the outlook for inflation is quite as clear cut as you state. Nevertheless, NSI IL certs are an excellent product, which should form part of everyone's portfolio.

ses6jwg

One thing in life that is certain, is that nothing in life is certain.

RayWolfe

fred101 wrote: »

I am writing this on the forum because I don't understand why no-one on MSE has picked this up yet and shouting about it!

Oh? I think we talk about it all the time, but thanks for your thoughts and welcome to MSE.
The general conclusion I draw is that, for a part of your savings and investments, a portion in NS&I Index Linked Bonds is a good idea.

ses6jwg

Well Fred, looks like you could be the new Messiah!

Cliddy

Just received my re-investment offer today from NS&I following previous 3 years of investment with them. £570 on £5k over the past 3 years of somewhat turbulent times. Perhaps someone can work out if that is good or not ? Seems OK to me. If I do nothing it will be reinvested automatically at the terms stated above. I feel inclined to certainly leave it there, subject to further research or perhaps any negative enlightening comments from this forum.

Sceptic001

MrMumble kindly worked out the annual rate over the last three years to be 3.6628% AER here. And that of course is net of tax.

I shall be rolling mine over...

martinman3

Cliddy wrote: »

Just received my re-investment offer today from NS&I following previous 3 years of investment with them. £570 on £5k over the past 3 years of somewhat turbulent times. Perhaps someone can work out if that is good or not ? Seems OK to me. If I do nothing it will be reinvested automatically at the terms stated above. I feel inclined to certainly leave it there, subject to further research or perhaps any negative enlightening comments from this forum.

It is important to note that re-invested certificates can be cashed within the first 12 months of re-investment and you still receive interest and index linking, unlike regular ones. So you can re-invest and wait and see.

If at the end of the term you continue your investment:

• it won’t count towards your investment limit for new Certificates – you can still invest up to £15,000 tax-free in each new Issue on sale at the time.
• you can cash in your investment at any time – even within the first year of the new term – and still earn index-linking and interest.

Cliddy

Thanks everyone for all this. Confirms my view that it's not a bad little earner and safe. Especially with the get out clause !

ses6jwg

Has anyone tried to buy these online?

I applied online last week, I tried to buy 3,500 and made sure I had enough in my account.

Paid via debit card and had confirmation email, as of yet nothing? Money still in bank.

RayWolfe

I always buy online.
Never a problem, money usually gets allocated same day and debited two days later for value the day after purchase. Documentation within a week.
I should contact them and find out the problem.