NS&I index linked 5 year

claire07

I'm maxed out on the current 3 year issue and have several fixed rate bonds maturing end of May with not many options what to do with it. I was wondering if it is worth taking out the 5 year index linked just because after a year you could close with interest or leave if rates are still poor. I guess what I'm asking is the 5 year basically just a 3 year with 2 extra years on the end or am I missing something?

wriggly

the non inflation interest rate varies over the term and is only equivalent to 1% over the whole term.

This means if you treat it like a 3 yr bond, cashing it in after 3 yrs, you'll get RPI + 0.9% or similar. Sorry, can't do the real math on this right now.

lisyloo

Hi Claire,

There are very slightly different rates.
So for example 1st year for 3 year product is RPI+0.85% whereas 1st year for the 5 years product is RPI+0.75%.
This is because the 5 years product has longer to compound the interest.
So if you are thinking of cashing in early then it looks to me like you would be better off with the 3 year product.

Are you sure you have maxed out?
I think the 3 year receently went from issue 19 to issue 20.

If you really are maxed out with no other options then personally I wouldn't worry about the 0.1%.

How is your pension fund lokoing?
What level of tax do you pay? 20% or 40%
Are your ISA maxed out?
What about debts?

Sorry don't have enough info on which to make sugeestions.

claire07

Shows I should have read the small print. I didn't realise that the five year had different yearly increases to the three year. Yes, I took out both issue 19 and the recent issue 20 as 3 year certificates as I had some fixed rate bonds maturing at the time. I may still go for the 5 year as the fixed rate bond rates on offer seem to be going down but usually I don't like fixing anything too far ahead.

JamesU

claire07 wrote: »

Shows I should have read the small print. I didn't realise that the five year had different yearly increases to the three year. Yes, I took out both issue 19 and the recent issue 20 as 3 year certificates as I had some fixed rate bonds maturing at the time. I may still go for the 5 year as the fixed rate bond rates on offer seem to be going down but usually I don't like fixing anything too far ahead.

You do not need to keep the 5 year certificates for the whole term, can cash in after a year with interest based on inflation for the year + 0.75%.

Also, if you do not already know, bear in mind you can roll over any exisiting maturing ILCs into new issues that are available in addition to the £15K cap per issue.

JamesU

spinybif_2

NS&I allow you to roll up existing investments into a new 3 year bond in addition to the new issues -they will write to tell you this is automatic unless you ask to cash in.