NS&I Index linked savings

cepheus

I am surprised why these are largely ignored on this site. Surely these are the most competitive investment bonds for basic and higher rate taxpayers, unless I am missing something?

3-year 14th Issue
Guaranteed compound rate over 3 years Index-linking + 1.15% Index-linking + 1.44% basic rate, 1.92% higher rate

5-year 41st Issue
Guaranteed compound rate over 5 years Index-linking + 1.10% Index-linking + 1.38% basic rate, 1.83% higher rate

The only downside I can think of is the lack of information.

from http://www.nsandi.com/press-room/press-releases/pr2004254.jsp
the RPI is at 4.4% which I think is the Index linking element

• so these appear to be currently at 5.55 and 5.5% tax free?
  
• I think if cashed in early you lose all interest?
  
• and the 3 and 5 year maturity dates are from the date of the investment, rather than the same date for everybody?

Perhaps someone will confirm all this

If private banks were as evasive as this about information, I suspect they would get into trouble.

lswwong

Yes I read this article today:

http://www.ft.com/cms/s/a79e233a-a7af-11db-b448-0000779e2340.html

and am thinking too.

"News this week that inflation exceeded the Bank of England’s target, with retail price inflation hitting 4.4 per cent in December, triggered concern from debt-laden consumers. But the flipside is some very attractive rates for cash savers.

National Savings & Investments’ (NS&I) index-linked certificates, which offer tax-free inflation-beating returns over three or five years, are paying the highest ever interest rates, while rates on one-year fixed-rate bonds have exceeded 6 per cent for the first time in more than five years.

Justin Modray at Bestinvest, the financial advisers, said: “While rising inflation is generally seen as bad news, it’s been a great benefit for index-linked certificates. Higher-rate taxpayers can now enjoy the equivalent of 9.25 per cent gross per annum, nearly 4 per cent more than the current ‘best buy’ savings accounts.”

NS&I’s three-year bond is now paying 1.15 per cent above RPI tax-free. Assuming inflation stays at the current level, this is equivalent to 9.25 per cent gross for higher- rate taxpayers and 6.94 per cent for basic rate payers. If inflation reduces, however, so would your return.

The five-year bond is paying RPI plus 1.10 per cent – giving higher-rate taxpayers the equivalent of 9.17 per cent gross.

Mr Modray said: “The key attraction of these investments is their tax-free status. Banks and building societies cannot fairly compete in this area. With the exception of cash Isas (which are now offering up to 5.8 per cent tax free), nothing else currently comes close.”"

ManAtHome

They've been a reasonable deal (although not stunning) for higher-rate payers for some time, but no so good for basic-rate taxpayers. Only in the news recently becuase the BoE has been sitting on their hands (whilst wringing them at the same time - good trick!) and allowed RPI over 4% - they are 50% over their CPI target, hardly 'as advertised'.

In theory, RPI should be a bit over 3% giving around 4.25% tax free - many savings accounts will pay more after savings tax. OF course, nulab could always decide that base rates should be determined by the price of (Asda basics**) cheese in future...

** Other cheeses may be available in your area.

StevieJ

These certificates do not pay interest if cashed in during the FIRST YEAR, after that interest kicks in e.g. RPI+ 0.9 = 5.3% after year 1 for the 3yr issue.
http://www.nsandi.com/products/ilsc/rates.jsp

I can only think people do not understand how these work, the key is you are not committed to 3 or 5 years to receive interest.

cepheus

These certificates do not pay interest if cashed in during the FIRST YEAR, after that interest kicks in e.g. RPI+ 0.9 = 5.3% after year 1 for the 3yr issue.

Thanks StevieJ

There must be written T&Cs somewhere, perhaps it is displayed during application.

cheerfulcat

The NS&I site has all the information you need, in exhaustive detail. T&Cs here.

StevieJ

No interest is earned on Certificates (except Reinvestments) repaid in the first year, see (terms and conditions) Here is the link to the t&c http://www.nsandi.com/products/ilsc/tandc.jsp

The point is they would not bother quoting a separate rate for each year if you had to go full term to claim interest.

djblamire

Out of interest what is the benefit of going for the 5 year ones rather than the 3 year ones, when they pay the same returns ?

Thanks
Daniel

cepheus

djblamire wrote: »

Out of interest what is the benefit of going for the 5 year ones rather than the 3 year ones, when they pay the same returns ?

Thanks
Daniel

You could only put up to 15k in each one and you don't know how fixed rate deposits will compare with index linked certificates in 3-5 years time.

StevieJ

cepheus wrote: »

You could only put up to 15k in each one and you don't know how fixed rate deposits will compare with index linked certificates in 3-5 years time.

Took your time to answer that