NS&I 5 year index linked saving certs 2011 issue - half way point!

veryintrigued

Well my renewal letter arrived today.

As I am cashing in I'll remove my notifications from this thread.

Thanks for your company on this thread.

littly_kitty

I've seen lots of place which recommend cashing-in if you are not sure if you will need the money in 3 or 5 years. But in the documentation it says the only penalty you have to pay for cashing in early is 90 days interest on the amount you cash in. Given that the interest rate is only 0.01% that doesn't sound like such a big penalty.

You will also lose the index linking interest on the rest of the money left in for the year you cash in. But again, because the interest rates are so low, that also doesn't sound like a big penalty (and also, it's just interest you are losing, the original amount invested is not lost).

Am I correct, or am I misunderstanding. Thanks!

AnotherJoe

littly_kitty wrote: »

I've seen lots of place which recommend cashing-in if you are not sure if you will need the money in 3 or 5 years. But in the documentation it says the only penalty you have to pay for cashing in early is 90 days interest on the amount you cash in. Given that the interest rate is only 0.01% that doesn't sound like such a big penalty.

You will also lose the index linking interest on the rest of the money left in for the year you cash in. But again, because the interest rates are so low, that also doesn't sound like a big penalty (and also, it's just interest you are losing, the original amount invested is not lost).

Am I correct, or am I misunderstanding. Thanks!

You are correct and as long as you time it right and cash in just after a year end period then effectively you lose nothing.
Whether they are useful depends in part on where you have your other money. I wouldnt recommend them as a first place to put money but if you've maxxed out other sources I think its a reasonable safety net for a percentage of your savings/ cash/investments.

polymaff

AnotherJoe wrote: »

You are correct and as long as you time it right and cash in just after a year end period then effectively you lose nothing.
Whether they are useful depends in part on where you have your other money. I wouldnt recommend them as a first place to put money but if you've maxxed out other sources I think its a reasonable safety net for a percentage of your savings/ cash/investments.

... particularly if you are a higher - or additional - rate tax-payer.

Kered

Letter arrived today, value on maturity is given as £5754.57.


I am reasonably pleased with that as it has done the job that I had hoped for, I shall now cash it in and use the original investment for what it was intended, the interest will go into spending money on my next holiday :T

littly_kitty

I’m considering weather or not to renew for 3 years or 5 years.

As I understand it, there’s is no benefit to renewing for 5 years. The reason for this is that the current rate is so low that they can’t cut it any further. So in 3 years time, the rate on offer will either be equivalent to the current rate or better.

Is my thinking right? Thanks!

I’ve been reading around in lots of threads and this does seem to be the general consensus, but I thought I’d double check!

[Deleted User]

littly_kitty wrote: »

I’m considering weather or not to renew for 3 years or 5 years.

As I understand it, there’s is no benefit to renewing for 5 years. The reason for this is that the current rate is so low that they can’t cut it any further. So in 3 years time, the rate on offer will either be equivalent to the current rate or better.

Is my thinking right? Thanks!

I’ve been reading around in lots of threads and this does seem to be the general consensus, but I thought I’d double check!

The risk of opting for a 3 year renewal is that, at the maturity date in 2019, you will be offered renewal only at CPI, and not RPI, thus losing out on 2 years' RPI index-linking. The other risk is that you won't be offered renewal at all.

These risks may, or may not, be small. I just don't know.

Assuming that renewal is offered after 3 years, and that renewal is linked to RPI, I agree that the rate will probably be at least the currently offered renewal rate.

I've split my renewal capital between 3 years and 5 years approximately 50/50.

masonic

Deleted_User wrote: »

The risk of opting for a 3 year renewal is that, at the maturity date in 2019, you will be offered renewal only at CPI, and not RPI, thus losing out on 2 years' RPI index-linking. The other risk is that you won't be offered renewal at all.

Are you sure that a 5 year certificate guarantees index linking based on RPI for the whole term?

dqnet

Deleted_User wrote: »

The risk of opting for a 3 year renewal is that, at the maturity date in 2019, you will be offered renewal only at CPI, and not RPI, thus losing out on 2 years' RPI index-linking. The other risk is that you won't be offered renewal at all.

These risks may, or may not, be small. I just don't know.

Assuming that renewal is offered after 3 years, and that renewal is linked to RPI, I agree that the rate will probably be at least the currently offered renewal rate.

I've split my renewal capital between 3 years and 5 years approximately 50/50.

I had a little talk with them on the phone about this and they said they cant give a definite answer but these certificates have been going on for years with no real intention to remove them. If anything, they are waiting for enough people to cash in so that they can re-sell them as at present nobody is cashing in. With regards to renewing at only CPI, this wasnt mentioned at all. 3 year and 5 year seem to be exactly the same with no 'right' or 'wrong' decision. It mainly depends on what or if or when you need the money for. I'm probably going to renew all mine for the 3 year one and just cash in the index linking and interest over the last years to enjoy

littly_kitty

Deleted_User wrote: »

The risk of opting for a 3 year renewal is that, at the maturity date in 2019, you will be offered renewal only at CPI, and not RPI, thus losing out on 2 years' RPI index-linking. The other risk is that you won't be offered renewal at all.

Does anyone know: In the past, have they switched between RPI and CPI? I thought historically they have only ever done RPI.

I was also under the impression that, historically, they've always offered a renewal (although of course, we might be entering unchartered territory as I belive they no longer of these to new customers, which is something of a first).