Index Linked Savings Certificates

IanManc

I've got two 5 year certificates for £26k each. I inherited them and have renewed them ever since. They are due for renewal in early April.

Now that there is no access during the term on renewed certificates I'm in a terrible dilemma about what to do. I had always used the certificates as part of money I could access in an emergency, but now I won't be able to do that if I renew.

I don't anticipate needing access if I renew for 3 years - the minimum term I'm offered - but you never know, do you?

I always thought I'd keep my certificates for the rest of my life unless I needed access. I have some other certificates too, for various terms. 

I know that having these certificates is a fortunate position to be in and I definitely have a first-world problem, but any opinions one way or the other would be gratefully received. I know you can't make up my mind for me but  because I have a lot of health issues going on at the moment I am completely stuck about making the decision.
 
Thanks in advance, IanManc.

GeoffTF

Index linked gilts currently pay better and can be sold at any time, but that could be at loss if you sell before maturity and real interest rates have risen more than the market expects. There are already threads on index linked gilts on this board.

ColdIron

I have always renewed for 5 years and like you I've thought I'd keep them forever but now with no access I'll be renewing for 3 years in 2026. They might discontinue them but I've had a good innings so far and will take my chances

boingy

Sounds like an opportunity for a compromise. Keep one and cash the other one in and put most of it into an ISA with the rest in a normal savings account. That's your emergency fund.

John464

Depends on your personal circumstances
If I was younger I would renew them, but there comes a time for spending, not saving.
I'm 70 and have chosen not to renew one in because I want my savings where I can get at'em

longleggedhair

I’m in the same position. Given the high levels of inflation my certificates have grown to a considerable amount and formed part of my emergency buffer if needed. The loss of access is a big deal but I also don’t want to lose what I know many people would bite your hands off for. I will take the halfway house of renewing them for 3 years.

eskbanker

longleggedhair said:

I’m in the same position. Given the high levels of inflation my certificates have grown to a considerable amount and formed part of my emergency buffer if needed. The loss of access is a big deal but I also don’t want to lose what I know many people would bite your hands off for. I will take the halfway house of renewing them for 3 years.

In the context of OP holding two certificates but wanting to retain access then the 'halfway house' option is really the one identified earlier, i.e. renew one and put the other into an easy access product.  If you need access then surely having to wait (up to) three years instead of five isn't really a viable 'compromise'?

Albermarle

As suggested, probably best to cash one in.
One positive point is that currently savings interest rates are a little above inflation. Also probable that this will persist for a while longer yet, as inflation will most likely drop quicker than interest rates.
So in the short term at least you will most likely benefit financially, as well as having easy access.

GeoffTF

longleggedhair said:

The loss of access is a big deal but I also don’t want to lose what I know many people would bite your hands off for.

That used to be true, but, as I said, index linked gilts are now a better deal. The tax rules could change though.

Rollinghome

Sorry to hear of your health issues.  

The decision is going to be different for everyone depending on how the funds will be used.  You'll definitely need some emergency funds, so need to decide whether what you have elsewhere will be sufficient.  It might be that having to wait might for a portion would give you enough flexibility, and selecting 3yrs would at least give you an earlier opportunity to reconsider.

For someone who is more concerned about passing on as much as possible to the next generation or to a charity, then it's much simpler. 

Another factor would be how much you benefit from these being tax-free.  Without that benefit, I personally wouldn't bother with them now, especially as they're no longer linked to RPI but CPI. My primary reason for holding cash depends on having instant access.  I'll be able to delay looking at the alternatives and doing my own calculations until February next year.