Cash ISA and NS index certificates at same time?

ally18

Hi,
Can you have a cash ISA and also invest money in the index linked NS certificates at the same time or are they both the same thing?

I know you can only have one ISA per year but I don't understand the rest. I want to put £3k away to save but have £1k close by just in case.

Thanks

alastair_h

Yes you can they are two seperate things/products. See link for best ISA's available. You can put £3,600 away now if you wanted (2009/10 - unless already used). This inceases to £5,100 from 6th April 2010 (2010/11).

http://forums.moneysavingexpert.com/showthread.html?t=401374

ses6jwg

You can have up to £15,000 NSI Index linked per year, per issue, there are 3 and 5 year issues, so I assume up to £30000 of each annually.

They are also tax free

alastair_h

ses6jwg wrote: »

You can have up to £15,000 NSI Index linked per year, per issue, there are 3 and 5 year issues, so I assume up to £30000 of each annually.

They are also tax free

I think it's £15,000 per issue of each 3 and 5 year terms. There may be more than 1 issue per year or less - depends on if rates change.

http://www.nsandi.com/products/ilsc/howitworks

david78

alastair_h is correct. But the £15,000 limit applied to new investments. There is no limit for subscriptions made by re-investing existing, matured certificates.

ally18

Thanks for that but what would you say is best between them, the ISA or the bond?

RayWolfe

What's best, cheese or spaghetti bolognaise?

cheerfulcat

ally18 wrote: »

Thanks for that but what would you say is best between them, the ISA or the bond?

Hi, ally,

It depends on what you want the product for. A cash ISA shelters your interest from tax for as long as cash ISAs ( or equivalent accounts ) exist.

The index-linked certificates preserve your capital against rises in the RPI, and provide a fixed, tax-free amount on top.

Kohoutek

ally18 wrote: »

Thanks for that but what would you say is best between them, the ISA or the bond?

It depends how long you can afford to put away the £3000 you mentioned you'd like to save.

Index Linked Savings Certificates are available for three or five year terms. However, for both certificates, you can withdraw your money after one year with no penalty and still get interest paid on your capital. The interest ILSCs pay is currently 1% + RPI (a measure of inflation). Like ISAs, you pay no tax on these products.

Cash ISAs come in two varieties: fixed and variable rate. Fixed rates ISAs are products where you tie up your capital for a fixed number of years, or in some cases six months. In some cases it is literally not possible to withdraw the money until the end of the term, e.g three years, in others you can but with an interest penalty, e.g. you lose the last six months interest prior to the withdrawal.

Variable rate ISAs are products where you can withdraw your cash at any time, at no penalty. For that reason, they generally pay lower rates of interest than fixed rate ISAs. With fixed rate ISAs, the longer you are prepared to tie up your capital, the longer the interest rate.

However, we live in very uncertain times. The base interest rate set by the Bank of England is the lowest for two hundred years. There's recently been a spike in inflation which may continue. Since its likely interest rates and inflation will increase in the next 18 months, I wouldn't put any money in fixed rate ISAs. If I were you, I would put the £3000 you can afford to put away in an Index Linked Saving Certificate to protect yourself from inflation (as long as you don't need it for at least a year) and the remaining £1000 in a variable rate ISA. The interest rate on variable rate ISAs have the potential to adjusted upwards if the base interest rate increases, or you could simply transfer your money to another ISA later, or withdraw it if you need to spend it.

ally18

Hiya,

Thanks ever so much for the replies, its helps to have advice from others who know what they are doing. I thought I was ok with money but sometimes when you start to think about what to do for the best, it all gets muddled up and then I can't decide what to do, typical Librian!

Think I will do as you suggest, sounds good.

Thanks again.

EdGasket

Is the interest and Index-Linking on IL savings certificates equal to RPI + 1% each annum or RPI + 1% at the end of three or five years? RPI + 1% per annum, if it is that, seems a good deal right now with inflation creeping up and many savings rates under 1%.