NS&I: Index-linked Savings Certificates, 6.15% tax free

anthony_saver

Afternoon all,

I'm not a regular poster here but I saw this account with National Savings and Investments:

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

Basically in a nutshell:
Savings rate at RPI + 1.35% (average): Currently 6.15%
£15k deposit limit
3 year or 5 year bond
Tax Free

My question: What's the catch?

I read about these regular saver accounts at the moment, but they seem to have deposit limits of ~£250 per month. For me, I'm putting away £2k each month (yes lots of overtime, no house, no rent, company expenses etc... a happy state of affairs).

Right now I've got 14k in a Nationwide Cash ISA and 21k in the Nationwide e-savings ISA. The e-savings is losing money relative to inflation. So I'm looking to find a new home for my e-savings.

Would this product be good for me?

Anthony

nilrem_2

There isn't a catch

These are a good deal ATM especially if you are a tax payer, in the not too distant past with very low inflation the rate was not very good and I got rid of most of mine (collected over the years) but now I am considering reinvesting in them, I don't think one could do wrong with them TBH.

Do bear in mind that you do lose interest if you remove funds early on.

anthony_saver

Thinking about it, the question then burns down to "Will Base Rates ramp up significantly ahead of RPI within 3 years?"

If the answer's yes, then maybe a saving product linked to Bank of england base rates will be the best bet.

But, if the bank continues to hestitate on base rates I reckon this product will be the best best.

Either way, it sounds like a good safe haven to prevent your savings eroding in value.

StevieJ

anthony_saver wrote: »

Thinking about it, the question then burns down to "Will Base Rates ramp up significantly ahead of RPI within 3 years?"

If the answer's yes, then maybe a saving product linked to Bank of england base rates will be the best bet.

But, if the bank continues to hestitate on base rates I reckon this product will be the best best.

Either way, it sounds like a good safe haven to prevent your savings eroding in value.

These certificates can be cashed in after one year and you still receive a good rate of interest.

anthony_saver

OK, one catch I can foresee that isn't entirely clear on their website.

Will the RPI index linking be adjusted on a monthly or annual basis? I could foresee the RPI being higher in 6 months time, but I'd have a certificate that still only earns 4.8%+1.35%.

Milarky

I'd guess they'd give you the rate of RPI in the anniversary month (which is therefore an average of all twelve previous months) plus the bonus rate - but I' m only guessing at that. RPI is 'backward looking' so April's '4.8%+' is really what people taking out a bond in April 2006 should be being paid now (Am I right about that?)

anthony_saver

Ah I see what you mean, so it's going to be the RPI in April 2008 that concerns me.

Oh yes, one other question. These certificates, would I presume correctly that they are actual pieces of paper sent to me, or just an account number?. In terms of security, would they be worth their purchase price to someone who breaks into my house and steals it, or are they worthless to all but myself?

DeepSporran

Yes, the certificates are pieces of paper which could indeed be stolen, but to get the cash you have to apply to NS&I and provide bank account details for them to send the cash to. The thief would presumably have to set up a bank account in your name first before he could apply to cash them in.

baldbloke_2

anthony_saver wrote: »

OK, one catch I can foresee that isn't entirely clear on their website.

Will the RPI index linking be adjusted on a monthly or annual basis? I could foresee the RPI being higher in 6 months time, but I'd have a certificate that still only earns 4.8%+1.35%.

The value of the certificate changes with the increase or decrease in the RPI on a monthly basis after the first year. To this is added the net interest rate for that particular issue. The ts&cs on the NS&I site relating to these certs are quite good and do clear up the initial questions most people have (and I had).

If you mix these certs to cover inflation rises with high interest variable rate savings (cash ISA for starters) to cover base rate rises - and maybe a little of the highest paying yearly bonds to cover base rate drops - then most aspects of basic savings seem covered.
Add in a monthly Unit Trust fund investment of your choice and away you go.

That will be £500 please!:D

Liz_the_Whizz

How can you tell what rate you get on top of RPI for earlier issues? I can't seem to find it on the NS&I website.

I wanted to see if I would be better switching my existing certs to the new issue.

baldbloke_2

Liz_the_Whizz wrote: »

How can you tell what rate you get on top of RPI for earlier issues? I can't seem to find it on the NS&I website.

I wanted to see if I would be better switching my existing certs to the new issue.

The certificate that you received from NS&I shows the rate of return for that particular issue. Also if you look at their press releases under 'Media Centre' - top of NS&I Home Page - you will find details of every new issue although it will take a fair bit of searching I should imagine.

If you have not held the cert for one year then no interest or index-linking will apply so consider that if you do act.