NSI should I encash?

wadrian6

like some of you I bought the NSI index linked savings certificate in May 2011 and I can now encash it if I wish. The return has been as expected, around 4.5% tax free according to the latest RPI on 22 May 2012 and is better than any savings account or fixed deposit at the moment.

what are your thoughts on withdrawing the amount and putting it into a savings/fixed deposit account?
Pro: I know that RPI has been projected to not be as high next year, definitely nothing near the roughly 4% we've been seeing in the last 2 years, so if I keep the money in the return in 2013 might be terrible (around 2%).
Con: the economy is still in a terrible state. the interest rate is probably going to be low for at least another year, and possibly more QE coming, so RPI "might" just remain quite high. Also, the NSI interest is tax free (I'm paying 20% tax atm). NSI won't be releasing any more index linked issues in the next year (according to the telegraph), which some people are saying is an indication of more money printing and higher inflation.
So should I withdraw?

Many thanks for replying.

cepheus

Keep for the time being, you can take out later if required. They pay you the most recent anniversary value plus any positive index-linking and fixed interest for each complete month since then. If the RPI figure has gone down since the previous anniversary, you will still receive the full anniversary value plus fixed interest for each complete month.

With non indexed savings you always expose yourself to the risk that it will devalue relative to the real value of money. That requires a risk premium relative to NS&I index linked savings, not the other way round!

bigfreddiel

your returns beat inflation and are tax free - if you can do better than that with zero hassle, worries, hidden charges, and so on then go for it.

fj

Glen_Clark

wadrian6 wrote: »

RPI has been projected to not be as high next year.

For years now, Bankers have been forecasting lower RPI than we actually get. Low inflation forecasts are an excuse for more money printing. The money doesn't get where its needed, but sure greases a lot of palms along the way. Bonuses all round chaps.
But I digress. I put the maximum into index linked National Savings, and have no intention of cashing them in until I need to spend the money.

buffman

The more people that cash them in now, increases the likelihood of NS & I introducing a new tranche. This would be good news as inflation is not going away and I would like to protect more of my capital.