NSI Index-linked Savings Certificates

soulsaver

GeoffTF said:

John464 said:

soulsaver said:

There is no £100 fee at iWeb atm.

I've already got an account with iWeb and logged in to get a quote
There was about 1% difference between bid and offer
So 0.5% for each trade I guess?
Which is far more than I have been paying buying Vanguard and iShares Equity ETFs
Still not too to bad I guess
But what of the tax treatment?
I understand there is no tax on NSI Index linked - I have held 3 for about 15 years but never cashed one in.
If my MP was any good I would write and ask why they have done this?
As far as I can see, if the holder needs the money for an emergency, medical care or whatever, its in no one's interest to withhold it.  The holder would pay a reasonable penalty which benefits the taxpayer, and be less dependent on the state which again benefits the taxpayer.

What are you proposing to buy, and for how much? Index linked gilts have wide quoted spreads on the LSE. That reflects the price that you will get for small trades, which are costly to execute over the phone. The actual spread will be narrower for larger trades. I get better prices trading £50K+. Institutional investors get much better prices. iWeb does not allow you to talk to a dealer nowadays, so you will not know the price in advance.

@John464 isn't talking about gilts - he's on topic. Yes, I know it's unusual for MSE....

John464

soulsaver said:

GeoffTF said:

John464 said:

soulsaver said:

There is no £100 fee at iWeb atm.

I've already got an account with iWeb and logged in to get a quote
There was about 1% difference between bid and offer
So 0.5% for each trade I guess?
Which is far more than I have been paying buying Vanguard and iShares Equity ETFs
Still not too to bad I guess
But what of the tax treatment?
I understand there is no tax on NSI Index linked - I have held 3 for about 15 years but never cashed one in.
If my MP was any good I would write and ask why they have done this?
As far as I can see, if the holder needs the money for an emergency, medical care or whatever, its in no one's interest to withhold it.  The holder would pay a reasonable penalty which benefits the taxpayer, and be less dependent on the state which again benefits the taxpayer.

What are you proposing to buy, and for how much? Index linked gilts have wide quoted spreads on the LSE. That reflects the price that you will get for small trades, which are costly to execute over the phone. The actual spread will be narrower for larger trades. I get better prices trading £50K+. Institutional investors get much better prices. iWeb does not allow you to talk to a dealer nowadays, so you will not know the price in advance.

@John464 isn't talking about gilts - he's on topic. Yes, I know it's unusual for MSE....

Well I am interested in both really
Is it worth cashing in NSI Index linked bonds at maturity and buying index linked gilts on iweb?
(On the grounds they could be cashed in an emergency - fixed rate accounts have been suggested instead but you may not be able to cash them in early either.)
What of the tax treatment?

John464

JamesRobinson48 said:

Coupon payments on index linked gilts are taxable. 

Thanks for the reply
Does that mean the payment you receive for index linking is not taxable?
So you don't have to declare it?

Marj246

I also have a 5 year NS & I certificate coming to maturity. I understand the new certificates are now based on RPI and not CPI. Mine and my husband’s certificates are not in joint names. I understand that should one of us die, then in order to access the other’s funds that probate would be needed (if more than £5K). Should I wish to renew at maturity next month, then I will be renewing on a joint basis so this would not be a factor.

x44

The Coupon (ie interest) payment on UK Gov gilts both normal and index linked is taxable so yes you have to delcare it but the capital gain you make on them at sale/redemption is free of any capital gains tax.

This is why people like very low coupon gilts where most of the gain is in the capital value on sale while very little interest is paid.

..and its the capital gain which is the bit which is tax free.

So if you are a higher tax payer paying maybe both income and capital gains tax, having something whose capital gain on sale is totally tax free is very advantageous while you like the low interest that low coupon gilts provide as any income is being taxed at your highest rate - which you don't want.

x44

Back to front on the NSI index linked certificates, they used to be linked to the RPI which is generally higher but now are linked to the CPI which is generally lower - strange that innit!

So anything that HMG wants more money in (student loans?) they will link to RPI, which anything that needs HMG to pay money out they will link to the lower cpi!

cc123mm456

@Marj246

The main issue to be aware of, is that for renewals of the Index Linked Savings Certificates, NS&I have changed the rules relating to early closure.

Previously you could close them early, at the penalty of losing the current years index linking and interest.

The new issues are not accessible at all until the end the of term. The early closure is no longer an option.

When you have a joint holding then, as you mentioned, you shouldn't need probate on the death of one of the joint holders. The full holding should get transferred to the remaining holder. In this case, the fixed term date will not change, and the remaining holder will not be able to access the funds until the end of the original period.

On the other hand, when you have individual holdings, on the death of one of the holders, the funds would be released to the estate, but probably probate would be required (depending on the value).

Actually I think this might be academic anyway. I don't know for sure, but I would guess that, as NS&I are not offering new applications (only renewals of existing holdings), then they may not offer the option for you to convert 2 individual holdings to a joint holding.

As x44 mentioned, NS&I changed the index from RPI to CPI. I think that happened more than 5 years ago, and so your existing certificates will be using CPI anyway.

Slinky

What's the feeling about renewing these 5 years certificates for another 5 years? Good value or not? I'm not even sure how the CPI thing works, is it an average across those years or the value at a particular time?

eskbanker

https://forums.moneysavingexpert.com/discussion/comment/81957894#Comment_81957894

The feelings are largely those expressed above, i.e. not as good as they used to be now that there's no early withdrawal permitted. The indexation process remains the same as it always has been, except for using CPI instead of RPI for a few years now, i.e. the certificates track the value of the index, at opening and closing (and, notionally, in between).

TheTelltaleChart

I understand one option is renewing but this time for 3 years instead of 5, which would shorten the lock-in.