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NS&I Index Linked Certificates - Stick or Twist?


It was more an act of indecision than decision and I'm now wondering whether letting them roll over is such a good idea.
They've rolled over based on CPI of course.
I have around £275K split roughly 50/50 between a S&S ISA and an unwrapped account and around £25K as instant access cash in the bank.
The investments are pretty much this give or take the odd fraction of a percent.
Stock name % Weight Sector
1 Fundsmith Equity Class I 29.7% Global
2 Ruffer Investment Company Red Ptg Pref Shs GBP0.0001 28.8% [N/A]
3 Capital Gearing Trust Plc Ord GBP0.25 20.8% [N/A]
4 SDL UK Buffettology General 10.2% UK All Companies
5 Smithson Investment Trust Plc Ord GBP 10.0% [N/A]
6 Cash 0.5% [N/A]
I'm adding to the ISA from monthly salary and should max that out.
I don't want to tie my "cash" up in a SIPP or pension so my thinking would be possibly just keep it simple and go open a Vanguard account and chuck it in LifeStrategy 60.
I know this is not risk free unlike cash
I hear lots of commentary that the linkers are like rocking horse poo and to keep them at all costs but I think a lot of those comments tend to come from older posters who perhaps might be keen on the inflation linking.
Thoughts welcome
Comments
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These are far preferable to index linked or conventional government bonds IMHO, so if you were thinking holding bonds anywhere in your portfolio, such as within LS60, then it would probably be better to keep your linkers and invest in a higher equities version of VLS. You'll obviously have some bond exposure within CGT and RICA but don't have the option of reducing the bond weighting there.£25k in instant access cash seems high and this will almost certainly perform worse than your linkers. If you could use some of this to purchase your VLS60 and keep the linkers that would seem a more optimal solution also. The linkers could be considered readily accessible cash, so as long as you have enough to see yourself through the withdrawal period, could make up part of an emergency fund.
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Index linked savings certificates are, IMHO gold dust. They are no longer available, I wish they were.They make up a relatively small part of your portfolio and seem to compliment and add diversification to your other holdings.
Personally £25k cash seems high and I would look to do something with say £20k of that (even if only premium bonds, which are basically cash), before touching the index linked savings certificate.Your certificates are (very) likely to outperform index-linked gilts (the next best thing), and are the only asset-class guaranteed to match CPI with 0 volatility and essentially no risk.You are lucky to have got some before NS&I stopped offering them and if you post later on that you sold them I may act out the ending of Planet of the Apes.0 -
Stick inflation is only going one way.
Shortage of workers
Shortage of micro chips
cost of shipping
increasing NI
NMW is going up again
Power cost gas & electric.
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Thanks all so in no particular order
Cash in the bank (literally instant) lets me sleep at night. Not sure that's an easy personality trait to change.
I'm in my 40's with a salary so perhaps don't put the same value on that inflation linking that someone older and/or without that income might.
My reasoning was that I've never dipped into that NS&I pot it's just been there in the background since 2015 as "emergency cash" so if it was in Vanguard (or anywhere else to be fair) I wouldn't plan on needing it.
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..Stick....we have been rolling ours over ever since we had them
.."It's everybody's fault but mine...."1 -
masonic said:These are far preferable to index linked or conventional government bonds IMHO, so if you were thinking holding bonds anywhere in your portfolio, such as within LS60, then it would probably be better to keep your linkers and invest in a higher equities version of VLS. You'll obviously have some bond exposure within CGT and RICA but don't have the option of reducing the bond weighting there.£25k in instant access cash seems high and this will almost certainly perform worse than your linkers. If you could use some of this to purchase your VLS60 and keep the linkers that would seem a more optimal solution also. The linkers could be considered readily accessible cash, so as long as you have enough to see yourself through the withdrawal period, could make up part of an emergency fund.
1 -
Could I ask why though?
All I see is something that seems to have turned £19,100 into £19,900 in five years.
If the reasoning is "switch" the emergency funds so there's less in the bank and the linkers are the emergency fund then yes I get that.
I think that one comes down to my own comfort level about emergency cash accessibility0 -
Aminatidi said:Could I ask why though?
All I see is something that seems to have turned £19,100 into £19,900 in five years.
If the reasoning is "switch" the emergency funds so there's less in the bank and the linkers are the emergency fund then yes I get that.
I think that one comes down to my own comfort level about emergency cash accessibilityLike you my investments are not 100% equities. Bonds are currently return free risk, with YTM of ~0.7% and potential for short-term capital loss. Even over the last 5 years where inflation has been particularly low, your annualised return has been 0.82% (from figures provided). As discussed above, there are multiple drivers of higher inflation that have come into play recently, so inflation will not be as low over the next 5 years as it has in the prior 5 years.Currently I am using a mixture of cash and premium bonds as a proxy for part of my government bond allocation, but these are both inferior to NS&I linkers. I expect cash, PB and government bonds all to have negative real returns (vs CPI) in the coming years.1 -
Aminatidi said:Could I ask why though?
All I see is something that seems to have turned £19,100 into £19,900 in five years.
If the reasoning is "switch" the emergency funds so there's less in the bank and the linkers are the emergency fund then yes I get that.
I think that one comes down to my own comfort level about emergency cash accessibility
Who knowsWhat you have is basically something with the security, safety and 0 volatility and almost 0 real risk of a bank account that is linked to inflation. The only investment that could possibly be better currently is a public sector pension, or making voluntary National Insurance contributions to increase your state pension upto the max.
It is likely that a diverse portfolio of equities will beat inflation over the long run. What you have is about 7% of your portfolio in an asset as good as cash in terms of safety and volatility, but the interest it is earnings is equal to inflation. If you hold £25k cash for peace of mind think of this as holding £45k cash - which is fine btw. However I would hold this for the long run and see it as being in the part of the portfolio you don't touch . It's inflation insurance, as safe as cash, it will probably beat any cash savings rates.0 -
Aminatidi said:2 Ruffer Investment Company Red Ptg Pref Shs GBP0.0001 28.8% [N/A]3 Capital Gearing Trust Plc Ord GBP0.25 20.8% [N/A]
I hear lots of commentary that the linkers are like rocking horse poo and to keep them at all costs but I think a lot of those comments tend to come from older posters who perhaps might be keen on the inflation linking.
Thoughts welcome
You've more than half of your portfolio in RICA and CGT. Ruffer has around 20% in linkers and CGT has 29% - despite yielding close to nothing. If Peter Spiller could swap most of those for zero risk NS&I I/Ls, he'd likely do it in a shot.And you've got them without paying a 1-2% OCF.
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