NSI Index Linked Savings Certificates

Ash_Pole

I inherited some of these a few years ago and they've done pretty well, especially when inflation was over 10%.
However, now that CPI is 2.0% I'm wondering if it's worth cashing these in when they expire later in the year. A 3 year fix elsewhere generally pays around 4.8% which after tax is 3.8%.
Are interest rates expected to stay higher than inflation in the medium to long term?

GeoffTF

Ash_Pole said:

Are interest rates expected to stay higher than inflation in the medium to long term?

The market and the Central Banks both have bad records of predicting future interest rates. Historically, interest rates (before tax) have usually been a little above inflation, but not in the recent period of Quantitative Easing and artificially low interest rates.

Albermarle

What to do depends a lot on your own financial situation.

For example I have money in investments that may or may not keep up with inflation ( hopefully will grow more than inflation but not guaranteed)
I have money in cash savings that currently enjoy interest rates above inflation. How long will this last ? Nobody knows? Maybe a year?
I have money in these index linked certificates. This is guaranteed to keep up with inflation, so is a useful part of the mix. Also once sold, you can not buy a new one.

charlie12525

I was looking into this the other day. I have a few of these. They are not due to mature but the anniversary on a couple of them is approaching in a couple of weeks. They are issue 54 (I think) so, unlike the newer issue, I can cash them in and doing this just after the anniversary means I get the index linking up to that point.

The consensus, following a bit of research, seems to be that CPI will be at 2% until 2028. That could of course be wrong but I am cashing mine in.

nyermen

Unless there's another type I'm not aware of, then there's also the consideration of instant access.  Currently, you can withdraw before maturity but with a penalty (loss of interest etc).  I have one kept as an emergency fund, eg to pay the mortgage in event of job loss etc).  It's nice that it stays with inflation and is there just in case.
However, I understand that when they all next renew, they switch to a new rule of no withdrawal before maturity.   That means what I have them for becomes an issue, I dont want to wait eg 3 years to withdraw if I suddenly had an issue.

badger09

Albermarle said:

What to do depends a lot on your own financial situation.

For example I have money in investments that may or may not keep up with inflation ( hopefully will grow more than inflation but not guaranteed)
I have money in cash savings that currently enjoy interest rates above inflation. How long will this last ? Nobody knows? Maybe a year?
I have money in these index linked certificates. This is guaranteed to keep up with inflation, so is a useful part of the mix. Also once sold, you can not buy a new one.

Totally agree. 

I understand why the inability to cash in will mean many people won’t renew. I don’t envisage needing to access mine, and in addition to your points above, the benefit for me is the tax free status. I’ll be renewing mine for another 5 years when they mature in 2026.