NSI index-linked savings - maturity options

traineepensioner

Hi,

I'm looking for a little advice on what to do with my maturing NSI index linked savings (approx 17K).
The initial interest rate was RPI + 1% over 3 years. However, the new rate has been reduced to RPI + 0.15% (both are tax free).:(
I'm a basic rate tax payer and I've already max'd out on my ISA for this year, I don't need the cash at the moment and I already have another NSI savings bond running for 5 years (15K at RPI + 0.5%).
In view of the reduction in the rates and the new penalty for cashing in the savings early, is it still worthwhile investing with NSI? Is there anything better out there?

Many thanks

Rollinghome

traineepensioner wrote: »

Hi,

I'm looking for a little advice on what to do with my maturing NSI index linked savings (approx 17K).
The initial interest rate was RPI + 1% over 3 years. However, the new rate has been reduced to RPI + 0.15% (both are tax free).:(
I'm a basic rate tax payer and I've already max'd out on my ISA for this year, I don't need the cash at the moment and I already have another NSI savings bond running for 5 years (15K at RPI + 0.5%).
In view of the reduction in the rates and the new penalty for cashing in the savings early, is it still worthwhile investing with NSI? Is there anything better out there?

Many thanks

If you want to be in cash savings then it will to some extent depend both on your view of inflation and of future savings rates. With inflation at 3% you'd get 3.0+0.15 = 3.15% net of tax. At the basic rate that's equivalent to 3.94% gross. Do you expect to get a better rate elsewhere?

There was also an effective penalty for early withdrawal under the old terms because the interest rate was stepped so that 1% was only achieved if held for the full term. Now the penalty is largely avoidable. If you cash in immediately after an anniversary you just lose 0.15% for 90 days, so equal to 0.0375% over the year.

For what it's worth I've been renewing expiring 3 year certs for 5 years and will review the situation each year.

Stanley_St

I have decided to keep mine, and if necessary sell off bonds in my S&S ISA if I need the money. We have priviledged access to the new NS&I saving product by virtue of having had one before.


If it was possible to sell these NS&I index linked savings certificates on the open market (which of course it is not), then they would be worth more than the current face value. So to cash in now you are not getting the true value of the product.

opinions4u

Unless you need to spend, or wish to be more adventurous, I'd reinvest.

kidmugsy

Rollinghome wrote: »

There was also an effective penalty for early withdrawal under the old terms .... Now the penalty is largely avoidable.

You need to be careful: if you cash in part of the certificate you lose the index-linking on the whole of the capital for that anniversary year. That's a much more severe penalty than the old-style certificates had.

Rollinghome

kidmugsy wrote: »

You need to be careful: if you cash in part of the certificate you lose the index-linking on the whole of the capital for that anniversary year. That's a much more severe penalty than the old-style certificates had.

A good reason for anyone likely to want to withdraw smallish sums to buy each issue as several different certificates rather than as a single certificate - as suggested here some time ago. Anyone who didn't do that could consider splitting into 3 year and 5 year certificates when they reinvest which I seem to remember is an option.

Nicholas-bloody-Parsons

Rollinghome wrote: »

A good reason for anyone likely to want to withdraw smallish sums to buy each issue as several different certificates rather than as a single certificate - as suggested here some time ago. Anyone who didn't do that could consider splitting into 3 year and 5 year certificates when they reinvest which I seem to remember is an option.

Yes. I just split my NS&I reinvestment into two, half in the 3 and half in the 5 year and got them to send me the loose change back.

For this very reason. If i needed some money back (for say an emergency) then there would be less of a penalty to pay.:T

redbuzzard

I'd be a buyer at RPI+0.15% if I could.

bigfreddiel

once a ert rolls over you can cash in at anytime without losing any interest

redbuzzard

In fact, thinking about it, I might be a buyer at RPI minus 0.15% too - it's not so much the interest rate, as the guarantee that makes it attractive. We have the RPI+0.5% issue, maturing June 2016.

If when inflation takes off, that could be the only investment we have by then that has kept its purchasing power.

le_loup

bigfreddiel wrote: »

once a ert rolls over you can cash in at anytime without losing any interest

No longer true.