NS&I index linked certificate new issue

[Deleted User]

I like these as a taxfree savings vehicle. We started saving in them in 2004
and already have a substantial sum invested

You can go on the website if you have held them for over a year and you can use the calculator to work out the total value

I also like the fact that they can be cashed in before the term end if there was a dire emergency

Lyncroft

Thanks David, you've answered my query. Any thoughts about where RPI is likely to be over the next year or so?

david78

Lyncroft,

Have a look at the spreadsheet calculator on the NS&I website. Its quite useful and allows you to calculate returns up to 17th April (at time of posting -- presumably they update it each month).

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

It seems from this, that the best time to buy is at the end of a month, and the best time to sell is at the start of a month. As you get full index linking for part months. Can anyone confirm this?

PS: Don't know where the RPI is going. My crystal ball got smashed.

(There is also an online calculator, I found out http://www.nsandi.com/products/ilsc/calculator.jsp)

jinkssick

Is this info from Martin in the savings area, still ring true? or it needs updating?

Inflation Beating Guarantee: The rate at which prices increase in inflation, is currently at an 11 year high. NS&I, the government backed savings organisation, has Index Linked Savings offering to pay 1.15% more than inflation. Better still the inflation rate it uses is the Retail Prices Index (RPI) which is the higher measure, at 4.4%. This means it pays 5.55% overall.

A further bonus is these savings are totally tax-free, meaning that to get the same interest from another account, basic rate taxpayers would have to be earning 6.93%, and higher rate a huge 9.25%.

However, the cash must be left there for at least three years, and at least £100 must be deposited, so this isn't for someone who wants a short term place to save. And if inflation drops, its relative performance could drop too. Yet as it's guaranteed to be higher than inflation and tax free, at least you know your money will always grow quicker than prices will rise. Overall I'd say it's definitely worth considering as a place to put some of your cash.

jonnyw_2

With RPI at 4.8% and the above RPI now on offer being 1.35% then that makes 6.15% tax free. Max £15000 still holds, although this is per person so husband wife and children can have them.

So its above 7 1/2% equivalent for a basic rate tax payer and just over 10% for a high rate on my maths.

You can cash them early but you loose an awful lot of the interest and they become a bad deal if you do this.

Of course if base rates go up then the chances are the rate on non-indexed deposits will go up with them, but these certificates will stay the same.

I bought some on the entirely irrational basis that when my council tax goes up, then RPI goes up with it and i get some of the money back in interest!

Cappsy

david78 wrote: »

It seems from this, that the best time to buy is at the end of a month, and the best time to sell is at the start of a month. As you get full index linking for part months. Can anyone confirm this?)

I'm considering cashing in a 15 month old 3 year issue certificate to pay a bit off the mortgage and reinvest the remainder in a new cert. so I've have been looking into the t&cs.

From NSI Website
http://www.nsandi.com/products/ilsc/tandc.jsp

"3. For the purposes of these terms and conditions, a month is completed at the end of the day immediately preceding the same nominal day as the date of purchase (for example, for a Certificate purchased on 5th January, the first month is completed at the end of 4th February)."

"9. The amount due when cashing in a Certificate which has been held for at least one complete month from an anniversary date will be the anniversary value on that anniversary date plus:
(a) index-linking for each complete month from that anniversary date to the date of repayment; and
(b) 1/12th of the annual interest for each complete month held from that anniversary date.
This paragraph does not apply to any month not completed before the maturity date."

Therefore investment month relates to the date you bought them rather than the beginning of the calendar month. So it appears to not matter when you buy, but the time to sell would be just after the completion of an investment month (I may be wrong, it's a bit early on a Sunday for me).

I suppose you could also consider the date the new RPI is announced (lately between 12th and 20th) but I can't begin to think of that 'til I've had another mug of tea.