Index-linked Savings Certificates questions

hebron

Are Index-linked Savings Certificates worth having compared to say fixed rate bonds?
I have never held these before: so am i right in thinking that the current RPI which I think is about 3.5% plus 1 % bonus would give you 4.5% tax free. Thats per year for 3 years. Am I right? I understand that the RPI fluctuates.

Thanks

lisyloo

The certificates are tax free (no income tax or CGT).
Are you bonds tax free? Do you pay tax?

so am i right in thinking that the current RPI which I think is about 3.5% plus 1 % bonus would give you 4.5% tax free

Actually RPI is 5.3% so with the 1% bonus, you'd get approx 6.3% for the last year, tax FREE.
So broadly speaking YES.

(It's a bit more complicated than that because the compound is RPI +1%, the first year on the 3 years product for example is RPI+0.85%).

As you know RPI fluctuates and future returns are unknown, so you have to take a view on what you think will happen to inflation.
Personally I think it will stay higher than the Bank of Engalnd estimate, BUT you need to recognise this is personal speculation.

It also depends on your LOST OPPORTUNITY cost i.e. what can you personally get elsewhere.
If you have debts at say 30%, then clearlt it would make sense to pay those off first.
Your own opportunities will depend on your tax status, spouses tax status, pension situation, ISA situation and debt levels.
Some people (like people with high % debts) have the opportunity to get a greater % elsewhere.

I would certainly look at the tax sitaution with the bond.

ESKIMO

Is CPI any use?

Hungerdunger

hebron wrote: »

Are Index-linked Savings Certificates worth having compared to say fixed rate bonds?
I have never held these before

And unfortunately you are unlikely to hold them in the foreseeable future as NS&I withdrew them a couple of weeks ago due to over-subscription.

Mickygg

Not quite sure why this thread has re-surfaced from 28th May - Eskimo do you know something we don't - such as the ILSC's are to reappear tracking the CPI rather than RPI?

StevieJ

Mickygg wrote: »

Not quite sure why this thread has re-surfaced from 28th May - Eskimo do you know something we don't - such as the ILSC's are to reappear tracking the CPI rather than RPI?

I think he may prove to be the oracle

slinga

StevieJ wrote: »

I think he may prove to be the oracle

I was thinking the same thing myself.

Any updates as to when the IL Certs may be issued again.

I ummed and ahhed about buying the 5 years certs and the next thing I know they've been withdrawn.:o

dunstonh

Any updates as to when the IL Certs may be issued again.

Expectation is 2011 when the new funding levels are set. With them already breaching 2010 funding levels it is a fair guess that they are not going to return a product that will make the situation worse.

DaveJo

Just had a 15th issue 3year cert mature.

Interest over the three years was :

Yr1 - 6.15% (7.68% basic taxpayer)
Yr2 - 1.30% (1.63% basic taxpayer)
Yr3 - 6.44% (8.05% basic taxpayer)

Average = 4.63% (5.7875% basic taxpayer)

Would be interested in how that compares to a 3 yr fixed rate bond taken out in September 2007 but can't find rates for that period.

StevieJ

DaveJo wrote: »

Just had a 15th issue 3year cert mature.

Interest over the three years was :

Yr1 - 6.15% (7.68% basic taxpayer)
Yr2 - 1.30% (1.63% basic taxpayer)
Yr3 - 6.44% (8.05% basic taxpayer)

Average = 4.63% (5.7875% basic taxpayer)

Would be interested in how that compares to a 3 yr fixed rate bond taken out in September 2007 but can't find rates for that period.

I have a 4 year Halifax ISA taken out around that time, rate = 6.3%, I think. There some spectacular fixed rate bonds in 2007-2008, then there was a risk the banks would go bust, although there was protection up to 35k.

alanq

Chelsea BS 3-year bond started July 2007 paid 6.55% gross.