3 year Index-linked Savings Certificate reaching end of term. What to do next?

bgscotty

Hi,

I'd appreciate any advice...

I've just received a letter from NS&I informing me that my 3 year Index-linked Savings Certificate is about to reach the end of its term. It asks what I want to do next.

I can either:

a) continue earning tax free returns for a further term of the same length

After its anniversary date, the certificate will automatically start earning: Year 1 Inflation-proofing + 0.85% ; Year 2 Inflation-proofing + 0.95% ; Year 3 Inflation-proofing + 1.21%

If I keep the certificate for a further full investment term, the equivalent annual rate of return will be inflation-proofing plus 1.00% pa compound tax free/ AER.

Or I can:

b) Reinvest in a different term or type of tax free certificate

These are:

Index-linked certificates: 3 years- Index-linking + 1.00% AER / 5 years- Index-linking + 1.00% AER

Fixed Interest Savings Certificates: 2 year- 1.25% AER / 5 year- 2.25% AER

Or I can:

c) Cash in the certificate



Which of the above options is the best?

Thank you in advance.

Scotty

musehead

I'd either continue with the same or transfer to a 5 year certificate if you're don't need the money now.

StevieJ

I would let it roll, you have an instant access, inflation beating,tax free savings account, not easy to equal elsewhere.

soulsaver

Assuming you want to stay in SAVINGS I think it's a 'No Brainer' for a basic rate tax payer, and a double NO BRAINER for a higher raters. I'd recommend you roll it over to a 5 year if you can do without the cash for at least a year.

Why a year? Well if it works the same in 'roll over' as normal, you get no interest if you close before one year. After (at) that it beats just about every other fix available for early closure penalties, ie if you closed at exactly one year you'd get index linking + 0.85%(?) tax free which, whilst not guaranteed, is very probably easily gonna be the best one year deal available; and if you then leave it a further year (& then every anniversary) you'll get a similar option. And it's in addition to your isa allowance...


I'm not sure what the arrangement is for closing in between anniversaries: You definately can, but it may mean you miss out on the in between months interest & indexation, but I'm certain you don't lose accrued interest beyond your last anniversary. Some one will be along to enlighten us...

Sceptic001

soulsaver wrote: »

Why a year? Well if it works the same in 'roll over' as normal, you get no interest if you close before one year. After (at) that it beats just about every other fix available for early closure penalties, ie if you closed at exactly one year you'd get index linking + 0.85%(?) tax free which, whilst not guaranteed, is very probably easily gonna be the best one year deal available; and if you then leave it a further year (& then every anniversary) you'll get a similar option. And it's in addition to your isa allowance...


I'm not sure what the arrangement is for closing in between anniversaries: You definately can, but it may mean you miss out on the in between months interest & indexation, but I'm certain you don't lose accrued interest beyond your last anniversary. Some one will be along to enlighten us...

Reinvested certificates are not subject to the one year rule. They receive index-linking and interest for every complete month even if cashed in early.

StevieJ

Sceptic001 wrote: »

Reinvested certificates are not subject to the one year rule. They receive index-linking and interest for every complete month even if cashed in early.

That is why I said they were instant access in my reply.

Primrose

As it's my understanding that NS&I are not offering any kind of tax free certificates to new savers at the moment, if you can afford to roll over your money into another tax free account and don't need access to the money, the best thing would be to roll it over for at least a year, especially if you're a taxpayer. If you do need some of the money, perhaps only roll over a proportion of it. If you've already used up your cash ISA allowance for this year, there are no other tax free savings available.

StevieJ

Primrose wrote: »

As it's my understanding that NS&I are not offering any kind of tax free certificates to new savers at the moment, if you can afford to roll over your money into another tax free account and don't need access to the money, the best thing would be to roll it over for at least a year, especially if you're a taxpayer. If you do need some of the money, perhaps only roll over a proportion of it. If you've already used up your cash ISA allowance for this year, there are no other tax free savings available.

You have full access on a rolled over account, you can cash it in at any time and be paid interest and bonus.