NS&I savings certificate - cash in or renew?

Penguin31

I have an NS&I index linked savings certificate that expires next week. I can cash it in or renew it for another 3 year term, with an interest rate of RPI based index linking+0.05%. I've renewed it in the past.

But they have just changed the renewal terms so that there is a penalty for cashing in early of 90 days interest on the amount cashed in, plus losing index linking for the whole certificate for that year. There is a chance that I might want to cash in early in a couple of years to buy a house.

Any advice on what to do would be gratefully received!

talexuser

Tough one. They are obviously trying to give you the least interest possible by small print, so cutting down even on inflation rates if you don't follow the rules exactly.

It all depends on inflation, the QE pessimists (like me) think it will be a problem some time, the optimists think some magic financial bullet has been discovered to mask the fundamentals for long periods, or even forever.

We can't predict the future, if the government stops giving banks cheap money they will have to compete for funds and rates may rise, whether inflation is generally higher then is the call you have to make.

I too have certificates and will probably roll them over in a couple of years just for the safety, but this is not advice because my circumstances will be different to yours. You'd need to calculate the early cash in penalty and compare to the best, for the sake of example, 2/3 year fix you can get now.

lisyloo

I think it depends on how likely you are to withdraw.
If you are likely to withdraw it doesn't seem worth it to me.

Mickygg

Depends on your circumstance. If you won't need the cash and you are a higher rate tax payer then you can't currently get better in savings so best to rollover.

kidmugsy

talexuser wrote: »

They are obviously trying to give you the least interest possible by small print
.

There's nothing "small print" about it: they go out of their way to draw your attention to it.

If you know, OP, that you won't need the money for at least a year, I suggest that you roll it over and then, if in a years time your plans have hardened, cash it all in immediately after the anniversary date. That way the penalties are trivial.

Or even roll over part of it on this system and remove the rest now.

Penguin31

Thanks for the advice everyone, I really appreciate it. I am a higher rate tax payer and I'm not totally sure I will cash it in early, so am leaning towards renewing. But I'll give it some more thought before making a final decision.

ColdIron

If you're a higher rate taxpayer and aren't sure you'll need the money I'd say the case for rolling over is pretty compelling

Vortigern

90 days loss of interest at 0.05% doesn't amount to very much. The greater danger is losing almost a year's worth of indexation, but this can be avoided by withdrawing soon after an anniversary IIRC.