NS&I 2011 5 year - no downside to 5 year renewal?

tushingham

Deleted_User wrote: »

If you go for 5 years, and at the 3 year point there is a fabby renewal (eg RPI plus 0.5%), you can't go for it. You can access your money on a loss of 90 days interest (negligible loss at 0.01%) and with minimal index linked loss if timed well, but you won't be able to access the renewal rate and you're locked out of ILSC unless they are on sale. Best to go for 3 year term. I've split mine, half 3 years and half 5 years.

The renewal later says
'...... Even if the rates on offer for ILSC fall between now and the maturity date, you'll still earn the rate quoted above if you renew your investment for a further term of the same length. If the rates go up between now and the maturity date, you will receive the higher rate. '

I have taken that to mean that if there is a fabby renewal rate at 3yrs then those on a 5yr term should receive it too? Could be wrong though! Been known to happen before......often!

AnotherJoe

tushingham wrote: »

I have taken that to mean that if there is a fabby renewal rate at 3yrs then those on a 5yr term should receive it too? Could be wrong though! Been known to happen before......often!

Yeh I do think you are wrong

What that means, as I read it, is that's concerning the renewal right now. Eg suppose you tell them today you wish to renew for 3 years. That won't happen until your maturity date, which say for mine is 11 May. Well they may announce on 8 May that rates will be say an extra half a percent. If that's the case, you'll get it. So it's about the current bond not the new one,

I would be sure they put that in to stop everyone waiting until the last minute to renew in case of that sort of eventuality.

N1AK

Deleted_User wrote: »

That's an important consideration, Archi Bald, but, on the assumption that you won't need the money for 5 years, it's not a case of just going for the 5 year term. You're locked into a miniscule return over inflation for 5 years, with the only alternative being to cash in and lock yourself out. The OP posited that it's a no brainier to go for 5 years. I don't think it is as clear cut.

I completely agree with you on this. There's any number of places you could invest money if you know you're not going to need it for 5 years so the question should be how to get the best balance of risk and return.

Personally I wouldn't take the 5 year renewal but I think it will be a good option for a decent number of people.

theGrinch

Am I right in believing interest on this product is excluded from the £1000 a year tax free saving allowance?

AnotherJoe

The interest is and always has been tax free, so it must be ...... I hope !
Is it even classed as "interest" ?

AnotherJoe

N1AK wrote: »

I completely agree with you on this. There's any number of places you could invest money if you know you're not going to need it for 5 years so the question should be how to get the best balance of risk and return.

What would some of those be? Always looking for ideas.
I've maxxed out on S123, cant be bothered with a host of £3k/£4k limit accounts and the shenanigans of swapping payments and that doesn't cover all of it by a long way in any case, and I have as much of a % in shares/funds as I think is wise.

N1AK

AnotherJoe wrote: »

What would some of those be? Always looking for ideas.
I've maxxed out on S123, cant be bothered with a host of £3k/£4k limit accounts and the shenanigans of swapping payments and that doesn't cover all of it by a long way in any case, and I have as much of a % in shares/funds as I think is wise.

If you're a higher rate taxpayer then you'll already have used up more than your savings income tax allowance. I don't think the income guaranteed bonds are tax free so you'll be paying 40% on the 2.55% return (leaving about 1.53%). You can get up to 2.2% on a 5 year cash ISA. You've also got the option of p2p, pension contributions, or S&S depending on your view of those.

Personally I'm heavily biased towards S&Ss but I'm 31 and investing long term so I'm not concerned about volatility.

joe134

theGrinch wrote: »

Am I right in believing interest on this product is excluded from the £1000 a year tax free saving allowance?

Yes it is, like Isas.
To me, the only reason for rolling them over , is if you think inflation is going to rise faster than rates.
and it changing from rpi to cpi.?
You can already get 2.2% on an isa, fixed, for 5 years though;;
If an Isa came up paying 2% +,for 3 years, it would be jam today, and would probably sway me away from rolling mine over.
I don't need the brass, so even 5 years wouldn't bother me, but, I would not take the 2.2% for 5 years, too low, as I think inflation will rise over that period.
They may be reintroduced, this gov is going to need our brass sometime in the future to pay off the debts they keep upping.
Only time will tell.somethings got to give.
wrong side of 70 to worry either way:cool: