NS&I Index Linked Saving Certificates

twister1

I have a 5 year NS&I Index Linked Savings Cerftificate taken out May 2011. The interest payable is RPI+0.5%.
With RPI now down to 1.1% is it time to cash these in and invest elsewhere?

nyermen

I've gone one of these, expiring next month and am wondering the same thing. I still expect inflation to rise, but hope is slowly fading on that happening immediately. Two things to bear in mind:
1) I doubt it will be RPI+0.5% when the renewal invitation comes up; Probably RPI+0.01% (looking at their spreadsheet value calculator you can download, this appears to be the yield now being offered)
2) Right now you can cash in with the old rules (you loose the years interest?). With the rules they changed in 2012, which will be enforced when the re-investment comes up, I believe it costs significantly more to cash in outside of the maturity. eg.You'd actually loose vs not reinvesting, if you cashed in the first year of renewal.

Right now, I intend to keep mine for another 5 years, simply because they're not selling the bonds any more, and keeping that inflation proofing is important to me. They're locked away from my eager fingers, but ready in case I need the cash.

Everyone is different though of course - make sure you look for other options for the amount you have invested and compare. Just bear in mind the above, and download the "value calculator spreadsheet" and look at the yield tables for new 5 year bonds - I believe they pay significantly worse now.

polymaff

twister1 wrote: »

I have a 5 year NS&I Index Linked Savings Cerftificate taken out May 2011. The interest payable is RPI+0.5%.
With RPI now down to 1.1% is it time to cash these in and invest elsewhere?

The annual rate on recent NS&I ILSCs is a miserable 0.82% which, even to a high-rate taxpayer is the gross equivalent of only 1.37% - which makes them look pretty poor value. The only reason for remaining / continuing with them is if you believe that inflation will rise.

Even that premise, though, is risky as NS&I have the right to change from the current RPI to a significantly lower Index as and when they wish. A pretty poor outlook.

veryintrigued

nyermen wrote: »

1) I doubt it will be RPI+0.5% when the renewal invitation comes up; Probably RPI+0.01% (looking at their spreadsheet value calculator you can download, this appears to be the yield now being offered)
.

You're right to doubt it.

Its RPI+ 0.05.

See link below for renewal options

http://www.nsandi.com/index-linked-savings-certificates

For you and the OP this thread may be useful:

https://forums.moneysavingexpert.com/discussion/4818555=

redmalc

Well I have no idea what to do with my five year investment when it matures in May,don't need the money so I may be better coming out and stick into a three year bond with Metro.

MiserlyMartin

veryintrigued wrote: »

You're right to doubt it.

Its RPI+ 0.05.

See link below for renewal options

http://www.nsandi.com/index-linked-savings-certificates

For you and the OP this thread may be useful:

https://forums.moneysavingexpert.com/discussion/4818555=

I'm also wondering the same thing. I just renewed a 5 year one at 0.05% + RPI. Pathetic, but as others have said you can't get them anymore and RPI could go up. What if we have negative interest rates going into a new recession? Then it will be a good deal as long as RPI is 1% +. What if RPI goes negative? At least you get back the original investment. My summing up is that all sorts of things could happen in the next five years and its good to spread money around a bit. Its tax free. The economy could tank but the government is backing NS&I it so secure as they are. RPI could go very high as the BoE looses control of inflation due to masses of printing. For that reason I'm keeping the 5 year one. I have another maturing in June, I shall probably renew that too if I don't need the money. Depends how things look then.

joe134

no intentions of cashing mine in , have several for years.
not until it's R.I.P, not RPI.
Hedge against inflation + , exhausted all other accounts.:)l:

LXdaddy

I also have several of these accounts, was investing every month until they were taken off sale.

I roll each over as it matures. Only thing I have started doing is when a 5yr matures I reinvest in a 3yr - the interest rates seem to be the same and if rates DO start moving up at some point I will be able to take advantage sooner (obviously if they go down I'm hit sooner - but there is not much room left for the interest rate to go down)

GreenBitterfly

Mine mature this year, I was wondering about renewing for a shorter term than the 5 year option.

joe134

LXdaddy wrote: »

I also have several of these accounts, was investing every month until they were taken off sale.

I roll each over as it matures. Only thing I have started doing is when a 5yr matures I reinvest in a 3yr - the interest rates seem to be the same and if rates DO start moving up at some point I will be able to take advantage sooner (obviously if they go down I'm hit sooner - but there is not much room left for the interest rate to go down)

There,s more chance of inflation rising than interest rates, so making holding them a safer bet.

bowlhead99

Thinking from a capitalist investor point of view:

Once you have a good sized emergency fund / rainy day fund to meet most of your short term and medium term spending goals, the only reason to hold extra cash for the long term rather than investments (i.e. funds of shares and bonds and property) is in case you have miscalculated it and really really need to spend it unexpectedly and can't afford a downward fluctuation in the value to have happened along the way.

So really, holding cash is more about protecting against the risk of investment losses than what potential return you're missing out on. But the big big problem with cash-type savings is that even though the money you get back is guaranteed, it might be worth less in real terms than it used to be, so you end up "losing" after all. This feature of cash, compared to other investment options, is its major Achilles heel.

For people that for one reason or another want a decent chunk of cash then, the opportunity to have your money inflation protected is a perfect solution to the one drawback of using cash instead of investments. In other words you only want cash to avoid investment losses, but normal accounts replace investment losses with likely inflation losses, but NSANDI index linked certificates have no investment losses OR inflation losses.

As such, they are a perfect product for many people, and would be so popular that the government can't afford to offer them to all as a standard product. You can only get one if you have a maturing one, then they'll let you keep it.

If I had one, I would very likely keep it. I note CPI headlines out today, the figure has gone positive, because petrol and food prices can't simply keep going down enough to keep dragging average inflation below zero while everything else is going up.

Obviously these don't use CPI but some other measure, which may in turn be different from your own personal measure of inflation. But in principle they are a valuable product, that a lot of people would love to swap with you for something with no guarantees like what they have to buy from their bank.