NS&I Index Linked Certificate Renewal

funkey_monkey

Hi,

I've got a NS&I Index Linked Cert which had an interest rate of RPI+0.05% over a period of 3 years.
This has now came to an end and the options now are:

1. Auto-renew for 3 yrs at RPI+0.01%
2. Renew for an alternative length @ RPI+0.01%. Options are 2, 3 or 5 years.
3. Cash in the certificate.

I've got an estimated value of £20,000 in this cert. I'm unsure what to do - I get the feeling that the poor terms is probably due to NS&I trying to get people out of these - which is probably an incentive to remain within it.


Can anyone confirm that option 3 is not worth undertaking? I don't need the money at present and I've got savings across the board in shares and saving accounts - so this would be another method of saving.


Is there any reason why I would invest for anymore than the 2 yr option in the renewal? Do people think that the rate will reduce further and hence it would be better to take it for a longer term?


Thanks.

notbritishgas

RPI is currently 3.5%, hardly a poor return.
But what will it be in a years time.

Stubod

..depends on what you would do with the money if you take it out?

Nowhere else will give you a guaranteed rate that will at least maintain pace with inflation.

Unless you fancy taking some risk on a S&S ISA?..

I am leaving mine where they are at the mo...so my opinion would be to renew., probably for 3 years....

AnotherJoe

If you dont have a better use for the money, renewing for 5 years is a no-brainer.

Reason being, as long as you time the withdrawal right, you dont lose out on RPI paid, and so you get the same benefits as if you'd signed up to 1,2,3 years without the risk that these will be withdrawn at next renewal, and losing out on a few years at RPI instead of CPI or some other figure. So lets say you sign up for 3 years and next time there is no option to renew, or you can only renew at CPI. Thats 2 years you've lost. Or suppose that you can now in 2 years time get the Atom Bank 5% fixed 3 year deal and RPI is running at 1%. So, cash in after an annual anniversary for your certificate just ended, you get the RPI added and only lose out on a fraction of 0.01% (a few p literally)

Monevator has a (much longer) article on why this is the obvious thing to do, from a few years back when they first renewed. Nothings changed, its a one-way bet. Heads you win, tails you dont lose.

redmalc

I renewed mine for a further five years a year ago and the returns have been good

soulsaver

And remember it's tax free interest...

Renew is a given IMHO if you don't have needs for the cash.

kidmugsy

AnotherJoe wrote: »

If you dont have a better use for the money, renewing for 5 years is a no-brainer. ... its a one-way bet. Heads you win, tails you dont lose.

Not quite. if you fix for 5 years and then in three years time ns&i offers a rollover rate of (say) RPI + 1%, you've missed two years of exploiting that opportunity.

If this risk bothered you, you could always split the money across the 3 year and 5 year terms.

Personally I'd go for the 5 year term - the odds probably favour it, and it's the least hassle option.

talexuser

I'd be very surprised if we get back to +1% in less than the pretty long term. The trend to 0.05% and then 0.01% seems to me an expectation by the treasury that inflation will take off, as it did with the sterling drop. With a balanced portfolio pension, isa, cash fund etc renewing is a no brainer.

funkey_monkey

Hi everyone - thanks. It confirms what I thought. I was going to renew for 3 years, but I'll renew for 5 yrs now

moneyfoolish

I just wish I could put more money into them!. Other than the OAP bonds they are the best return I can get from savings accounts.

alanq

From the renewal letter

"Even if the rates on offer for Index-Linked Saving Certificates 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."

but if your renew for a different term

"We will invest your money in the issue which is on offer when your investment matures. Interest rates could go up or down between now and the maturity date."

I have always opted to renew for the same term rather than take the risk of the interest rate dropping - though now there is little scope for the rate to drop unless future issues offer RPI-x%.