NS&I tax free investments

ScarletBea

I'm not sure if this belongs here or on the cutting tax forum, feel free to move it if you think it's best.
For me, it's a question of savings.

What are your views on the NS&I index-linked certificates?
Are they any good?
I wonder why they aren't mentioned in any of the saving articles...
As a higher-rate tax payer (I think), I'm trying to maximise savings/minimise tax, and I believe they look very interesting.

dunstonh

What are your views on the NS&I index-linked certificates?

Very good for higher rate taxpayers but overall returns are usually less than conventional investments even after tax so they are good for the "cash" element of your portfolio but not so much for your investment element.

Experienced investors will often overlook them as they have the tie in without the level of return they are looking for. Inexperienced investors tend not to like tie ins or are not knowledgeable enough to know the available options.

Apreciar

dunstonh wrote: »

Very good for higher rate taxpayers but overall returns are usually less than conventional investments even after tax so they are good for the "cash" element of your portfolio but not so much for your investment element.

Experienced investors will often overlook them as they have the tie in without the level of return they are looking for. Inexperienced investors tend not to like tie ins or are not knowledgeable enough to know the available options.

What are the available options????

dunstonh

What are the available options????

The UK has about 13 tax wrappers and around 30,000 investment options.

The_Fiddler_2

What are these 13 wrappers?

(And 30000 investment options? )

isofa

Covered in great detail on this thread:

http://forums.moneysavingexpert.com/showthread.html?t=528781

dunstonh

What are these 13 wrappers?

ISA (stocks and shares & cash)
PEP (still has a few different rules until until next year when they become ISAs)
onshore investment bond
offshore investment bond
endowment
CTF
Personal Pension (inc stakeholder)
Retirement annuity contract
Section 32 buy out bonds
SIPP
SASS
VCT
EIS

Then you have unwrapped investment options such as

Unit Trust/OEIC
SICAV
Investment Trust
REITs
Shares
ETFs
Hedge Funds
ZDPs
Gilts / Corp Bonds
Shares
life funds
pension funds
offshore funds

Some of the unwrapped items are used in conjunction with a tax wrapper or by themselves. Some "could" be considered tax wrappers in their own right.

I ran the list off quickly without reference so I have probably missed a few things. I also ignored some of the pension variations and other tax wrapper variations.

cheerfulcat

VCTs and EISs aren't really tax wrappers, though. They are tax-advantaged high-risk investments ( one of the risks being removal of the tax advantage! ). And the CTF is limited to children.

dunstonh

I wasnt sure which bit to put VCTs and EISs. As you say, they are investments with a certain tax advantage. However, you would only really likely to use them for their tax advantages.

CTF is still a tax wrapper though. Albeit an restricted age one. It's ability to mature into an ISA helps it. Endowment is on the list but you wouldnt consider them nowadays in monthly form. Although they are still possible in single premium form and can be beneficial for higher rate taxpayers potentially.

I could have included FURBs or EPPs as well with pensions and there are bound to be other variations in there which are not listed in both areas. i.e. Bricks and Mortar property funds (there is talk about them being able to reclaim the tax credit soon in the same way as gilts/fixed interest).

baby_boomer

For a higher rate taxpayer the Index linked certificates are always worth considering as they give a guaranteed tax free inflation beating return. This is an investment gold standard IMHO.

The Certificates are linked to the RPI measure of inflation (currently above 4% as it includes housing costs) rather than the government's chosen inflation measure which is currently below 2% (with a 2% target).

You are allowed £15K of new money into these certificates and old certificates can be renewed on top of this allowance.

It's a very secure base for any portfolio if you are a higher rate taxpayer. But NSI doesn't pay commission to IFAs so they may not highlight its attractions.

dunstonh

But NSI doesn't pay commission to IFAs so they may not highlight its attractions.

Personally, I find the portfolios of those where I use IL Certs tend to be in 1 million plus so it doesnt matter if we earn nothing on them because the bulk of the portfolio does pay.

Plus, these cases provide perfect evidence under TCF guidelines to prove you dont use commission bias.

However, I do tend to find that smaller portfolios from higher rate taxpayers dont use Certs as much as you tend to find they have a higher cash ISA base and are looking for outperformance on the rest.