NS&I index linked certificates

Joscar

Hi,

I am thinking of investing in NS&I index linked certificates, ( I have used my ISA allowance and have a bit more I could save) the rate of 1.35 + RPI sounds very good at present (1.35 + 4.3 = 5.65 tax free) but I have some questions .....

Is there a good way to do this? Is it better to invest a lump sum in one go, or watch the RPI and invest another £200 or so every couple of months.

I assume the interest rate changes every month over the 3 or 5 year term when the new RPI is published, is this right?

Is there any advantage of having a 5 year term rather than 3 year?

Is there a limit to the number of investments I make as long as I stay under £15,000?

Thanks
Joscar

CLAPTON

There is no point in watching the RPI as that only tells you the past and not the future so you may as well invest it all at one go unless you want it to 'mature' over a period of time.

you will only know the amount of inflation at the end of the term.

whether you go for 3 or 5 years probably depends upon how long you want to tie up your money to get the full benefits.

baldbloke_2

Joscar wrote: »

Hi,

I am thinking of investing in NS&I index linked certificates, ( I have used my ISA allowance and have a bit more I could save) the rate of 1.35 + RPI sounds very good at present (1.35 + 4.3 = 5.65 tax free) but I have some questions .....

Is there a good way to do this? Is it better to invest a lump sum in one go, or watch the RPI and invest another £200 or so every couple of months.

I assume the interest rate changes every month over the 3 or 5 year term when the new RPI is published, is this right?

Is there any advantage of having a 5 year term rather than 3 year?

Is there a limit to the number of investments I make as long as I stay under £15,000?

Thanks
Joscar

The interest rate will be as published for the particular issue - it averages the 1.35% over 3 or 5 years by increasing a little each year - an incentive to hold the cert for the full period. The monthly RPI figure is added to that interest as each new monthly figure is announced and you can see the actual value of your cert at any time by using the ns&i calculator.

I think these certs are excellent and I have them as the bedrock of my savings. Where else can you get that level of return tax-free on such a large amount with no worries about the security of your money? And they can be cashed or part-cashed without notice or penalty after 1 year.

You can make the £15000 for each of the current issues up by investing as many sums small or large as you choose. Split your money between 3yr & 5yr if you're unsure.

Personally I feel that the returns offered easily match over the period the supposed high returns on savings accounts and without the rate-chasing.

If a person is a non-tax-payer then they would look at this differently and I can not speak for them.

[Deleted User]

They are the bedrock of our savings too and I finished buying to the limit today for dh and myself in the 3 year certs. Now to think about issue 42 in the 5 year.

I`ll probably do this one in increments so it comes out as increments. Handy in retirement as tax free income
People should not think that they cannot get at their money in an emergency. They can but they will not get the full amount of extra interest however they will still be inflation-proofed

They add stability to a savings/investment portfolio as it is important to balance risk and reward

Jonbvn

For the majority of tax-payers, having at least some savings in these certs is a no-brainer IMHO.

Joscar

Thanks for your replies.

djblamire

Are these are good as people are making out ??

Remember, we don't know what the rate of inflation is going to me - If it drops significantly, couldn't you end up with a lot less than you would get in a normal savings account ?

Thanks
Daniel

moneyandmountains

djblamire wrote: »

Remember, we don't know what the rate of inflation is going to me - If it drops significantly, couldn't you end up with a lot less than you would get in a normal savings account ?

If inflation is low, then inevitably bank base rate will be low. That will mean that all of the variable savings accounts will reduce their rates accordingly.

Of course, if you manage to fix your savings rate at something high, then if the rate goes down you will be quids in. However, for most people this would just be a guess (economists etc. aside!).

The main advantage of the savings certificates is the tax advantage. I think that you will find that most people will use their ISA allowance first, then look at savings certificates after.

ManAtHome

No-brainer for higher-rate taxpayers, not too sure for standard rate (and as already mentioned, avoid if a non-taxpayer).

For the standard-raters - they look good at the moment as el BankO d'Excess has kept rates artificially low (so the gap between RPI and rates has narrowed) - they are now in the process of being "found out" as worldwide rates climb. Whilst I wouldn't guarantee we won't get a further bout of "keep 'em borrowing" rates (another wide gap between IR and RPI), if this does happen, you may want to think about investing in Euro's or Yuan...

In the 90s index-linked certs were over 4% + RPI.

lisyloo

whether you go for 3 or 5 years probably depends upon how long you want to tie up your money to get the full benefits.

BUt you don't have to keep these longer than 12 months do you?

After 12 months only full months of interest is paid so you could lose a few days.
If you are clever you should cash in on the last day of "the month".