Beware Of NS&I Savings Certificate Trap

alanq

This article highlights a change that could catch out the unwary in coming years.
http://www.telegraph.co.uk/finance/personalfinance/consumertips/jessicainvestigates/10579991/NSandI-put-my-money-in-the-wrong-savings-bond.html

If NS&I receives no instructions to the contrary then on maturity a Savings Certificate is rolled over into another of the same type for the same term. Under the rules one has 30 days after a certificate rolls over to make a penalty free withdrawal. However, the next time that certificate rolls over there will be no such right. This is totally unsatisfactory. One is invited to renew a few weeks before maturity. Even if one posts an application for repayment at that time there is no guarantee that Royal Mail will deliver it on time (or at all). NS&I does not confirm receipt of instructions so one would not know that the certificate was being rolled over until after it had already happened.

The FCA has not yet reached final conclusions but has concerns about fixed term bonds that automatically roll over. Let's hope it does something to rectify this situation.
http://www.fca.org.uk/your-fca/documents/thematic-reviews/tr13-04

IronWolf

Thanks, one to watch out for, and reminds me I need to change my address with NS&I too

kidmugsy

This would be a pest if you wanted money out, say, 11 months after rollover. But if it's a few days after, then the penalty is nugatory. Assuming, that is, that it was ALL the money you wanted out. A partial withdrawal would sting, though.


UPDATE: the censoring software must have been written by an utter twit, don't you think?

UPDATE 2: what the devil? Now the loony suppression of the letters ell, oh, vee, and ee within "rollover" have been restored. Dafter and dafter.

alanq

kidmugsy wrote: »

This would be a pest if you wanted money out, say, 11 months after rollover. But if it's a few days after, then the penalty is nugatory. Assuming, that is, that it was ALL the money you wanted out. A partial withdrawal would sting, though.

Once rolled over "The penalty is equivalent to 90 days’ interest on the amount cashed in." So if the certificate has only been rolled over a few days one may get less than the capital amount back. Granted that for current issues of Index Linked the interest component is only 0.05% pa. so 90 days penalty would not hurt too much. For Fixed Interest certificates the penalty would be much more severe.

Sandi_L

Another change that you may not be aware of - I received a letter today relating to a maturing fixed interest certificate, and it seems that now you can only withdraw or reinvest in another fixed interest certificate. I fully intended reinvesting in an index linked certificate, and was told I could do this when I initially invested - also the NS&I website (Q&A) still says this is an option. This doesn't seem right to me!

alanq

Sandi_L wrote: »

I fully intended reinvesting in an index linked certificate,and was told I could do this when I initially invested - also the NS&I website (Q&A) still says this is an option.

I doubt that there was any commitment made at the time you made your initial investment as to what options would be available for reinvestment years later. Can you quote exactly was in your Ts&Cs?

Maturing Certificates can now only be reinvested into the same kind of certificate Fixed into Fixed, Indexed into Indexed.

See
"fewer options when your investment matures
You’ll no longer be able to switch to Index-linked Savings Certificates without affecting your investment allowance for any new Issues that may be on sale."
http://www.nsandi.com/changes-fixedinterestsavingscertificates

"fewer options when your investment matures
You’ll no longer be able to switch to Fixed Interest Savings Certificates without affecting your investment allowance for any new Issues that may be on sale."
http://www.nsandi.com/changes-indexlinkedsavingscertificates

Where do you think the NS&I web site says otherwise?

kidmugsy

alanq wrote: »

Granted that for current issues of Index Linked the interest component is only 0.05% pa. so 90 days penalty would not hurt too much. For Fixed Interest certificates the penalty would be much more severe.

It was only the ILSCs I was thinking of; you are quite right.

Colin_Hunt

I got a letter from Jane Platt this morning, 0.05% ! I'm withdrawing at the moment, but I'm going to sleep on it for a couple of days.