NS&I Index-linked Savings - Renewal

benny5

Hi,

I've got an NS&I Index-linked savings certificate maturing in three weeks. The renewal options are 2,3 or 5 year terms at RPI plus 0.01%.
I can't see a need for this money in the next 5 years.
Anyone else out there in a similar position?
The big question is:
1) What will happen to interest rates over that period?
2) Will inflation (RPI) outstrip any interest rate increase?

I'm inclined to go with the 3 year option, any views.

Regards,

Benny.

bowlhead99

I would say inflation would outstrip any interest increase, certainly over next few years, difficult to tell long long term but the longest option isn't very long in the grand scheme of things.

UK economy is not particularly strong at the moment and hard to see much appetite at the BofE for them whacking the rates up and making mortgages more expensive etc.

Meanwhile we know inflation is going up because of sterling weakening against everything else; shops won't be able to avoid passing on those price rises of everything imported, even though they've made a valiant effort since last summer. Oil is up too.

Although traditionally people think of interest rates being increased when inflation goes up, the particular type of inflation we're likely to feel in next couple or years is not because we're all feeling flush and need to be throttled back from spending. It's just because it costs a lot to buy stuff from around the world whether we like it or not.

So personally I think ILSCs would be great to hold if I was allowed to buy them. If you're unsure, but you know you don't need the money, can you just stick some of the renewal in the 5yr bonds and some in the 2 or 3? Then you get another chance to consider it in a few years time and get to "diversify" your renewal dates.

ColdIron

I'm pretty sure you can only renew for 3 or 5 years

Sceptic001

ColdIron wrote: »

I'm pretty sure you can only renew for 3 or 5 years

You can renew for two years only if the maturing certificate was originally a two-year term, which I think only applied to one issue back in 2006.

moneyfoolish

I've recently renewed for 5 years on the basis that I can always withdraw the money if I want to with only a small penalty if done at the correct time.

Stubod

...for me a no brainer. Interest (in general) lower than inflation and have been for a few years. (I know there are some accounts that pay more, but these have a maximum amount you can save). Assuming you have maxed out on these then I would leave in for 3 yrs at least, (assuming in 3 yrs you can withdraw or probably re-invest for another 3 yrs)...its what I am doing with mine....

AnotherJoe

No brainer, 5. As pointed out you can withdraw without penalty as long as you time it right.
With 3 there is always a danger they won't renew next time with RPI and it will be CPI or similar, so 5 would give you 2 extra years. If interest rates have risen substantially in 3 years odds are RPI will have also.

Morphoton

I agree with the above that it's a no-brainer to go with the 5Y. Another way to look at these is to compare to the equivalent indexed linked gilts. Admittedly the yield of these have been reduced by QE, but the 5Y (2022) IL gilt has a real yield of minus 2.5%. So NSI is giving you 2.5% above the market rate. Therefore there is a risk that these could change to CPI or even be withdrawn for re-investment. Remember they are withdrawn for new investment. Currently I have only have 5Y and on maturity rolling over to 5Y.

joe134

benny5 wrote: »

Hi,

I've got an NS&I Index-linked savings certificate maturing in three weeks. The renewal options are 2,3 or 5 year terms at RPI plus 0.01%.
I can't see a need for this money in the next 5 years.
Anyone else out there in a similar position?
The big question is:
1) What will happen to interest rates over that period?
2) Will inflation (RPI) outstrip any interest rate increase?

I'm inclined to go with the 3 year option, any views.

Regards,

Benny.

just renewed mine and OH!s for another 3 years.
Inflation on the way up, and like you, we don,t need it.
Just let them roll it over.

benny5

Many thanks to all for such valuable contributions.

May go for the 5 year option and as suggested above with the penalty for early redemption not excessive can always cash-in should rates change dramatically.

All your contributions greatly appreciated.

Regards,

Benny.

LXdaddy

Certainly roll them over. Personally I am rolling each of mine as they come up into 3 year.

Yes 5yr might be better but I'm into this habit now (I have 80 different accounts)

I do wish they'd go back on sale but I can't see that happening for quite a while.