Index-linked Savings Certificates - Significant Change

masonic

trickydicky14 said:

Andreg said:

For those of us who might need access to the money during the 3 or 5 year term, index linked gilts are now a better investment.   The coupons are low so there is little income tax to pay, but there is a large tax free redemption payment.  If you buy at current market prices and hold them to maturity the return is RPI + approx 0.5%  (a lot better than the CPI you get on index linked certificates).  You can sell them at any time prior to redemption albeit subject to the risk of fluctuation in the market price.

Could you please give some info on how to purchase index linked gilts and some background reading, as this is new to me thanks.

There have been quite a number of threads on the subject, including worked examples of cash flow calculations etc, but of course the search function leaves a lot to be desired.

For a good introductory video, you could check out https://www.youtube.com/watch?v=Vh5FmZRjBpo

Lots of official information here: https://www.dmo.gov.uk/data/gilt-market/index-linked-gilts/
and a very useful table of current data on linkers here: https://www.yieldgimp.com/index-linked-gilt-yields
Several options would allow you to lock in RPI + 0.7 to 1.0% for a few years made up of a low (taxable) interest payment and a larger (tax exempt) capital gain at maturity.

Stubod

The gov are probably reluctant to just stop renewals so see this change as a means of slowly closing them down. After all, when was the last time they offered any new ones??

cricidmuslibale

Stubod said:

The gov are probably reluctant to just stop renewals so see this change as a means of slowly closing them down. After all, when was the last time they offered any new ones??

I think you are on the right track here, sadly!

The last time an Issue of Index Linked Savings Certificates went on general sale was in May 2011 when only 5 year certificates were made available with a maximum investment of £15,000. This Issue was withdrawn in early September 2011 since when only renewals of maturing certificates have been available.

I do actually think that some time in the distant future there will be a new Issue of these certificates available again but not until it is clear that we’re very much in a climate of low inflation again! If they were to go on general sale again in the near future, there would be a huge demand for them which NS&I (alongside of course the Treasury) definitely do not want right now, especially after having brought in so much money from the recently withdrawn issues of Guaranteed Growth Bonds and Guaranteed Income Bonds!

Andreg

trickydicky14 said:

Andreg said:

For those of us who might need access to the money during the 3 or 5 year term, index linked gilts are now a better investment.   The coupons are low so there is little income tax to pay, but there is a large tax free redemption payment.  If you buy at current market prices and hold them to maturity the return is RPI + approx 0.5%  (a lot better than the CPI you get on index linked certificates).  You can sell them at any time prior to redemption albeit subject to the risk of fluctuation in the market price.

Could you please give some info on how to purchase index linked gilts and some background reading, as this is new to me thanks.

ILGs have to be purchased through a stockbroker, like shares.  Your bank probably offers the service.  Sorry i cannot advise on which stockbrokers are cheapest and offer the best service but there are lots of forum threads on the subject.

masonic

Andreg said:

trickydicky14 said:

Andreg said:

For those of us who might need access to the money during the 3 or 5 year term, index linked gilts are now a better investment.   The coupons are low so there is little income tax to pay, but there is a large tax free redemption payment.  If you buy at current market prices and hold them to maturity the return is RPI + approx 0.5%  (a lot better than the CPI you get on index linked certificates).  You can sell them at any time prior to redemption albeit subject to the risk of fluctuation in the market price.

Could you please give some info on how to purchase index linked gilts and some background reading, as this is new to me thanks.

ILGs have to be purchased through a stockbroker, like shares.  Your bank probably offers the service.  Sorry i cannot advise on which stockbrokers are cheapest and offer the best service but there are lots of forum threads on the subject.

The youtube video I posted above describes buying at Interactive Investor, but this is probably only a good choice if you already hold investments there and are paying their flat monthly account fee. Others to consider are Hargreaves Lansdown (~£12? transaction fee, no custody charge in fund and share account) and iWeb (£5 transaction fee only, if you get in before they reinstate the account opening fee). Going via your bank is likely to be an expensive option, but no harm in checking.