NS&I Index-Linked Savings: Q&A

JamesU

lisyloo wrote: »

What are "pension tax credits" please?

I know what "pension credit" is, but I don't think that is what is meant here.
Need to make sure people are not talking at cross purposes, which I think they might be.

Sorry my mistake. I think the government calls it pensions savings credit. I just have it in my mind as a tax on pensioner's savings as it reduces the pension credit available. Anyway what I am trying to work out is whether or not ILCs, ISAs and with profits bonds are excluded from this calculation for pension credit.

And regarding age allowances, over 65, £9490 basic allowance, then 20% tax to approx £23K. But ILC income is excluded from age allowance recalculation?

Question on ILCs and means testing for care fees was a seperate question as I know with profits bonds are exempt from this (for the moment at least) not sure about the situation with ILCs.

JamesU

lisyloo

I happen to ahve a copy of an application for pension credit.
Check "part 4" but they want to know about

bank accounts
cash
NSI certificates
premium bonds
income/capital bonds
unit trusts, peps ISAS, toisas
money in trust
shares
any other money

You can have £10K savings disregarded, the rest reduces you pensions credit.

JamesU

lisyloo wrote: »

I happen to ahve a copy of an application for pension credit.
Check "part 4" but they want to know about

bank accounts
cash
NSI certificates
premium bonds
income/capital bonds
unit trusts, peps ISAS, toisas
money in trust
shares
any other money

You can have £10K savings disregarded, the rest reduces you pensions credit.

Thanks. This is what I thought. Effectively all types of savings will reduce entitlement to the pension credit.

So back to ILCs and age allowances? Maybe just loose wording in thread? but in summary fairly straightforward as....ILCs tax free, ISAs tax free, hence neither effect income tax allowances?

JamesU

Jonbvn

JamesU wrote: »

So all cash and stocks and shares ISAs fall outside means testing when calculating pensions tax credits? Really?

And do you also happen to know if with profits bonds are excluded from means testing towards pension tax credits?

JamesU

Income from ILSC & ISA's is only disregarded for CTC & WTC.

JamesU wrote: »

......in summary fairly straightforward as....ILCs tax free, ISAs tax free, hence neither effect income tax allowances?

Basically ILSC's & ISA's can be omitted from your tax return. Therefore, by definition they cannot effect your income tax allowances.

JamesU

Jonbvn wrote: »

Not pension credits. Only CTC & WTC.

Thanks. And what are CTC and WTC?

JamesU

Jonbvn

JamesU wrote: »

Thanks. And what are CTC and WTC?

JamesU

Working & Child tax Credits.

danny_28

I was logging on to report that the explanation for Index Linked Savings Certificates on the savings pages of this site is incorrect, then saw this post. I work for the Post Office as a Financial Specialist and I have had a number of customers come in to speak with me after receiving misleading information from this site.

It states under the savings section:

"Government-run savings organisation, NS&I, has 3 and 5 year Index Linked Savings that pay 1% more than inflation, the rate at which prices increase. It uses the higher measure, Retail Prices Index (RPI) inflation, at 3.7%, meaning it pays 4.7% overall. The max. deposit allowed is £15,000."

This is completely untrue and misleads the public, exactly the sort of thing that this website is supposed to prevent.

The certificates pay 1% fixed, and then the difference between the RPI on the date of opening the account and the RPI in 12 months time. Therefore, with the example of last year, inflation went down and so only 1% was received. It is important to note that the rate received was not 1% plus RPI.

This distinction is extremely important as to lead customers to believe that they are guaranteed 1% plus the RPI figure is completely misguided and incorrect, it also means that customers are predisposed to an account which I know is wrong for them but cannot advise them of such - they trust Martin, not me.

Quietmanc

danny_28's post above has really confused me now.I actually opened a 3 yr Index linked account with NS&I this morning,and during the process,the lady I was speaking with went through 'things I should know'.Loss of interest for early withdrawals etc. and finished off her little speech with "This account pays an interest rate of 1% plus RPI"

danny_28

Sorry I don't think I really explained it very well. I said 12 months firstly, by mistake. I just felt that a lot of customers were being misguided by the potential returns of this account - if the RPI really rises over the period, it will be a reasonable return, but I think for most people who want to see a good return over 3 to 5 years, that they should think of fixed rate ISAs to maximise their tax free savings, and maybe bonds for the rest.

This account does not guarantee anything over the 1pc fixed and although it is guaranteed to beat inflation, there are better accounts out there to see real and guaranteed growth.

Biggles

Quietmanc wrote: »

danny_28's post above has really confused me now.I actually opened a 3 yr Index linked account with NS&I this morning,and during the process,the lady I was speaking with went through 'things I should know'.Loss of interest for early withdrawals etc. and finished off her little speech with "This account pays an interest rate of 1% plus RPI"

".. 1% plus (inflation as measured by) RPI is absolutely correct.

Danny was trying to cover the situation when there may be deflation (though that is covered in the NS&I's terms), in which case the payment would never be less than the 1%, in other words you will never get 1% minus (deflation as measured by) RPI.