NSANDI change rules on ILSCs & ban early withdrawal

hallmark

Any certificates renewed from 23rd July 2023 onwards are locked in for the entire term.

Disgusting IMO and clearly NSANDI desperately trying to find ways of making what are currently a great investment less desirable so that people cash them out.

There's no justification for this. No access for a full 2, 3 or 5 year term is a joke.

dunstonh

There's no justification for this. No access for a full 2, 3 or 5 year term is a joke.

Most fixed term deposits have no access for the period of their fix.  So, ILC mirroring that is not a surprise and certainly not a joke.

hallmark

dunstonh said:

There's no justification for this. No access for a full 2, 3 or 5 year term is a joke.

Most fixed term deposits have no access for the period of their fix.  So, ILC mirroring that is not a surprise and certainly not a joke.

But with fixed term deposits, banks have little choice but to tie customers in as they're committing to paying them a certain rate of interest.

With ISLCs it's theoretically possible inflation could go to close to zero and stay there meaning somebody would not only have no access to their money for up to 5 years but they'd be earning no interest either. So the situations are very different.

Absolute disgrace IMO, it's clearly only being done to force customers to ditch the product without NSANDI incurring the bad publicity that would follow if they simply cancelled it.

Rollinghome

hallmark said:

Any certificates renewed from 23rd July 2023 onwards are locked in for the entire term.

Changing from withdrawal on demand to a fixed term is clearly a major change. Don't see much point in comparing with bank products as banks don't offer anything comparable and neither were the IL products offered by one or two BS a while back, in reality.

Most interesting would be to know the reasoning. 

Are they anticipating a return to savings rates exceeding inflation and want to prevent a wave of cashing-in?  Are they making them less attractive in order to encourage cashing in?  Or perhaps they want to encourage shorter terms to give themselves more flexibility to end renewals or change the ongoing T&Cs?

Worth remembering that although returns are currently extremely attractive, that hasn't always been the case.

hallmark

A further point on this:

"Your options on maturity will normally be to: reinvest in a new Certificate of the same term (which will normally happen automatically if you don’t give us different instructions)"

Which means anybody who's not paying attention and who simply lets these rollover (which is lots of people I'd suggest, as that's been a perfectly reasonable way to do things for many years) is going to be tied into a very different agreement with no access to their money for up to five years. Ridiculous.

Albermarle

Probably worth pointing out though whenever a new poster has asked the forum, 'should I cash in my index linked certificates?' then every answer is NO. Especially as it is very unlikely you will be able to buy new ones in future.
Even when inflation was low they are a relatively unique product, which are a good part of anybody's long term portfolio of savings and investments.

hallmark

Albermarle said:

Probably worth pointing out though whenever a new poster has asked the forum, 'should I cash in my index linked certificates?' then every answer is NO. Especially as it is very unlikely you will be able to buy new ones in future.
Even when inflation was low they are a relatively unique product, which are a good part of anybody's long term portfolio of savings and investments.

I've been a big fan of these for years and unhesitatingly kept them despite them changing to the inferior CPI and dropping the extra interest (IIRC these were RPI+1.35% when I bought them).  And during the years the official rate of inflation was low I still rated them highly (essentially as a hedge against exactly what we're seeing with inflation currently).

That changes completely for me after this though.  I don't mind paying penalties, even harsh penalties for early access but I avoid all products that refuse access completely.

artyboy

Nope, I'm absolutely not getting the vitriol/hyperbole that the OP is voicing here - this is a fixed term bond that effectively guarantees that it will not lose value in real terms, and with no capital risk.

So I rather suspect to the vast majority of us without those bonds, that sounds like holy grail of savings, and you'd be absolutely nuts to withdraw, even in years of lower inflation. If there's a lock in, it's hardly lessening the attractiveness of the product - I'm still regretting cashing my one in over 15 years ago!

poppystar

Exactly exactly this ^^^ Having been badly bitten by fixing last year and seeing rates soaring over the rate I’m getting I would be reticent about fixing now except for the saving certs - fixing knowing it’ll keep pace with inflation (well, the measures of inflation) seems ideal. It’s not a huge amount of money so I’m unlikely to need to call on it. Of course I might think differently if that was not the case.

hallmark

artyboy said:

Nope, I'm absolutely not getting the vitriol/hyperbole that the OP is voicing here - this is a fixed term bond that effectively guarantees that it will not lose value in real terms, and with no capital risk.

So I rather suspect to the vast majority of us without those bonds, that sounds like holy grail of savings, and you'd be absolutely nuts to withdraw, even in years of lower inflation. If there's a lock in, it's hardly lessening the attractiveness of the product - I'm still regretting cashing my one in over 15 years ago!

It doesn't affect you so to you it's not a big deal.

For those it does affect I think it's more of a deal.  For example, anybody who was using these as their emergency fund.

If and when these start to rollover automatically and people belatedly realise they're locked in with no access to their money it's going to matter to a lot of people.

It's not hyperbole to call this disgusting, that's exactly what it is.

Rollinghome

artyboy said:

So I rather suspect to the vast majority of us without those bonds, that sounds like holy grail of savings, and you'd be absolutely nuts to withdraw, even in years of lower inflation.

Memories can be short. We've recently had several years of "financial repression" with savings rates below inflation in order to massage down the cost of government borrowing. So the advice of late has to always hold on.

The advice on ILSCs tended to be different when we had negative inflation and high interest rates.  For example, RPI was negative throughout most of 2009 while savings rates close to 7.00% were available.

ILSCs can be a useful insurance for some, but don't assume they'll always better ordinary savings rates, even over significant periods.  The exact numbers will depend on the individual tax position, but who knows what the smart position will have been over the next five years.