NS&I Index-Linked Certs

baldbloke_2

For those who don't receive email updates from NS&I it is worth pointing out that they have a new issue of 3 Year Index-Linked Certs - at RPI (currently 3.6%) + 1.15% over 3 years free of tax - with a maximum investment of £15k.

There is not a new issue of 5 Year Certs at present.

I couldn't see this mentioned elsewhere.

chesky369

Are you sure they're free of tax?

RubyBish

Are you sure they're free of tax?

The index linked certifcates and fixed interest certificates do offer tax free interest. If they didnt they would be very uncompetitive.

http://www.nsandi.co.uk/savingneeds/taxfreeinvestments.jsp

richgirl

I prefer index linked government stock which tend to appreciate more when inflation is on the rise as the capital is index linked also.

baldbloke_2

richgirl wrote:

I prefer index linked government stock which tend to appreciate more when inflation is on the rise as the capital is index linked also.

Thank you. That is very interesting. I didn't appreciate that the capital is index-linked - I had wrongly assumed that only applied to the 'yield'. The combination of index-linked capital plus a guaranteed yield makes that form of Gilts investment seem very attractive - and would probably explain their attraction to many serious investors of large capital sums. I must look into that to understand it better myself - maybe for the future.

The capital in the NS&I Cert is index-linked over the 3 yr period - that is the purpose and attraction of the 'investment' to most people. The added (net) annual interest is admittedly fairly low but does add considerably to the return at the end of the period.

I think that the simplicity of buying NS&I Certificates from only £100 at a time makes them an attractive and sensible proposition for many people who would not begin to understand the process of investing in index-linked gilts.

Can one make such a small investment in Gilts? Possibly I am wrong in thinking the minimum level of investment is quite high. A preliminary check suggests £100,000 minimum.

[Deleted User]

We hold ns&i index linked savings. The interest is indeed tax-free, which makes it a very attractive savings vehicle for those paying tax at the higher rates. We bought the 41st 5 year issue

http://www.nsandi.com/products/ilsc/rates.jsp

StevieJ

The new ns&i issue appears to be at a higher rate than the 41st 5 year issue, am I missing something?

baldbloke_2

StevieJ wrote:

The new ns&i issue appears to be at a higher rate than the 41st 5 year issue, am I missing something?

That's correct. The press release - which can be found in the media section of the NS&I site - says that 3 year gilt prices have risen and 5 year gilt prices have not.

Before reading that I had not properly understood the idea behind the index-linked certs but I have to say it makes more sense now. And it inspired me to read up on gilts - which was interesting in itself.

StevieJ

My comment was in reply to Kittie who appears to think that the 5 year ns&i is paying RPI + 1.51%

baldbloke_2

StevieJ wrote:

My comment was in reply to Kittie who appears to think that the 5 year ns&i is paying RPI + 1.51%

Apologies for jumping in there.

The current 5 yr 41st issue is paying RPI + 1.10% - not the figure given. Perhaps Kittie is thinking of an earlier issue she purchased.

StevieJ

Not a problem, the savings rate increases the longer you hold them e.g If you hold them for one year you receive RPI + 0.7, in the final year you receive RPI +1.51 this averages out to the quoted rate. I was wondering if they were confused and could be missing out on what could be a better deal.