NS&I Saving Certificates

JamesU

JoeCrystal wrote: »

I thought so, that is why I spread my savings into Index-Linked SC every month. That should yield me overall measure of inflation hopefully.

First Anniversary Interest:
January (Saved in March): 3.7+0.75 = 4.45%
February (Saved in April): 3.7+0.75= 4.45%
March (Saved in May): 4.4+0.75= 5.15%
April (Saved in June): 5.3+0.75= 6.05%

I hope that is right anyway...

Your strategy for purchasing ILCs over 5yrs is fine.

But you are mixing up %RPI which refers to inflation in the last 12 months with the return you expect to get from inflation + bonus in the next 12 months. The Jan - April %RPI figures are meaningless in predicting your future returns. The returns depend on the start RPI values which are known, and the final RPI values in each month 12 months from the investment which are not known yet.

See the example in post #6 above in this thread which hopefully will clarify this for you?

Hope this helps.

JamesU

lisyloo

That's pretty simple. Investment in any asset that makes a capital gain.

Sorry don't think I worded it well.
That a TAX FREE investment up to the limits you mentioned.

I was asking why on earth you'd want to invest/save into anything that you have to pay tax on.
Stevie J said - because sometimes there are better returns.
I said (or meant to say). OK I agree for 20%, but for 40% show me a TAXED investment that is better. (So this does not include CGT free investments).

This is why for me it's obvious to go for tax FREE savings/investments.
But obviously my mind set is affected by my tax rate.

StevieJ

lisyloo wrote: »

Sorry don't think I worded it well.
That a TAX FREE investment up to the limits you mentioned.

I was asking why on earth you'd want to invest/save into anything that you have to pay tax on.
Stevie J said - because sometimes there are better returns.
I said (or meant to say). OK I agree for 20%, but for 40% show me a TAXED investment that is better. (So this does not include CGT free investments).

This is why for me it's obvious to go for tax FREE savings/investments.
But obviously my mind set is affected by my tax rate.

Looking at it from the other angle, tax free investments that are worse than taxed investments, wouldn't take much doing to beat these even for a HR taxpayer.

Financial researcher Defaqto has highlighted eight accounts that pay a meagre 0.1 per cent interest to savers looking to shelter their money from the taxman.

http://www.telegraph.co.uk/finance/p...cash-Isas.html

lisyloo

OK (you guys are tough :rotfl:)
I was assuming not being a complete numpty.

Yes of course you can find examples to prove the point.
But let's assume I'm not a complete numpty and will look at the "best buy" tables.

Speaking generally is it therefore true to say that comparing "best buy" ISA with "best buy" savings account i.e. equivalent products in terms of risk and access (I'm getting the hand of tieing it down now ) then you are likely to find tax free options better if you pay 40% tax whereas this might not necessarily be the case for 20% tax payers.
Does that seem fair? - if we are comparing equivalents e.g. same asset class, similar risk.

Obviously I'm sure you can find examples otherwise if you comapre differernt asset classes, different risk, different liquidity etc.

StevieJ

Fair enough comment, but you do have to be on your guard so I am glad you are checking the best buy tables coming back to the point the NS&I are a great place to place cash for a HR taxpayer.

lisyloo

Cheers, just bought some more.

JamesU

lisyloo wrote: »

OK (you guys are tough :rotfl:)
I was assuming not being a complete numpty.

Yes of course you can find examples to prove the point.
But let's assume I'm not a complete numpty and will look at the "best buy" tables.

Speaking generally is it therefore true to say that comparing "best buy" ISA with "best buy" savings account i.e. equivalent products in terms of risk and access (I'm getting the hand of tieing it down now ) then you are likely to find tax free options better if you pay 40% tax whereas this might not necessarily be the case for 20% tax payers.
Does that seem fair? - if we are comparing equivalents e.g. same asset class, similar risk.

Obviously I'm sure you can find examples otherwise if you comapre differernt asset classes, different risk, different liquidity etc.

Maybe I am being a numpty, whatever a numpty is, because I do not understand your reasoning. Tax free options are not better for 40% tax payers relative to 20% tax payers because in both cases there is no tax to pay.

If the question is related to fairness of taxable savings accounts, (40% tax on interest vs 20% tax) this question is irrelevant. Why? the interest is income and the question is not related to savings accounts really. The real question is whether or not people on moderate incomes should pay 20% tax and those on a higher income pay 40% tax. And it is probably tangential to discuss this sort of issue on the ILC thread here.

JamesU

lisyloo

No James, it's nothing to do with fairness.
What I didn't understand initially is was why anybody quotes the - taxable equivalent.
e.g. If you had a 4% ISA it's equivalent to a 5% taxable savihgs account to a 20% tax payer.

The reason why I personally don't understand the value of this is because as a 40% tax payer I would automatically find the best investments to be
cash ISA
S&S ISA
CGT free stocks investment
NSI certificates
gold
i.e. the TAX FREE ones.

I have NEVER found a taxed investment where I have to pay 40% tax and get a better return than the equivalent tax free. I am assuming I'm shopping around (so we can exclude poor products) and also comparing similar asset classes, risks and liquidity, so not comparing apples with pears or cash with S&S.

BUT now Stevie has explained I can understand the reasoning for 20% tax payers.
Because I think it is possible to find some products (plain savings accounts for example) where the taxable account does actually pay MORE than a tax free version e.g. ISA.
So I now understand why they are quoted, even if for me (or higher rate tax payers) they are largely irrelevant because you are pretty much ALWAYS better off not paying tax.

If you know of any products where I can pay 40% tax and get a better return than the tax free version then please let me know.
Poor products are excluded and we need to be comparing similar products in terms of asset class, liquidity, risk etc.

our money (six figures) is in a combination of pension, cash ISA, S&S isa, gold, NSI and this tax year I paid 40p tax on current accounts which actually I think is rather good, although clearly there is room for improvement :-)

da1178

Hi all,

I have a student loan, the interest of which may go up to 4.4% in September, but I have managed to save up over the years more money than I owe. As I don't want to pay it back if I can earn more through saving I was wondering if, come September and the interest rate for repayment does goes go up to 4.4%, I can't find any ISA's or savings accounts that can beat that rise would I be betetr putting my savings into an NS&I Index-linked Savings Certificate? This would mean that I will still be earning more interest than I will be paying out?!?!?!? Is this right? Ive read all the guides on the website but find this whole thing rather confusing.

Any help????

lisyloo

would I be betetr putting my savings into an NS&I Index-linked Savings Certificate?

No-one can tell you this.
That would be speculation and it would be a gamble.
The Bank of England expect infaltion to come DOWN, so I think you'd be taking quite a gamble to beat 4.4%.
Others may have different views, but one things for sure, it is a RISK.

The safest thing to do would be to pay down your debt.

The certificates are a good product but the return is UNKNOWN.
You can off course loko at forecasts and consensus of forecasts but you need to undestand that's an informed estimate and a million miles from a guarantee.