Should I cash NS&I ?

missile

I have a 5 year bond value £23,491.37 which is due to mature 17.08.26.
I am considering cashing this to take advantage of higher rates currently available.
Any advice?

mebu60

Read your Ts&Cs. You will likely find you cannot cash it in before maturity. 

Should you be able to do so you will need to do the maths on current rate versus any penalties and new rate you hope to get (which will probably be lower now than it was yesterday).  

missile

It is only newer bonds which cannot be cashed early.
My bond pays CPI + 0.1%
AFIK, current CPI is 2.00% and there are many better fixed rate options available.
Unfortunately I would forfeit £491.00 if I cashed before anniversary, thus I decided not to cash prior to BoE decision.
Any advice?

mebu60

What value is the bond? 

ColdIron

mebu60 said:

What value is the bond? 

OP says £23,491.37

ColdIron

I have one of the older bonds and if you time your withdrawal carefully (just after the anniversary) you lose very little

Maybe wait 17 days?

missile

"Maybe wait 17 days?"
That is exactly what I intend to do. The BoE announcement is unfortunate timing for me.
I feel the NS&I bond was been a useful hedge against inflation, when RPI was the index link, but the CPI has not really kept pace.
I have estimated my return at circa 3.5% AER over the last 5 years.
Obviously no one can predict future, but I feel any of several guaranteed returns would beat my NS&I bond for the year.

Ash_Pole

missile said:

I have estimated my return at circa 3.5% AER over the last 5 years.

I'm in the same boat and I don't really have an answer as to the best course of action, but just on this point (and unless my maths is wrong) I think the 5 year return has been more like 4.5% AER.

missile

Ash_Pole said:

missile said:

I have estimated my return at circa 3.5% AER over the last 5 years.

I'm in the same boat and I don't really have an answer as to the best course of action, but just on this point (and unless my maths is wrong) I think the 5 year return has been more like 4.5% AER.

You are correct. I recalculated and when allowing for compound interest it is 4.07%

Albermarle

missile said:

"Maybe wait 17 days?"
That is exactly what I intend to do. The BoE announcement is unfortunate timing for me.
I feel the NS&I bond was been a useful hedge against inflation, when RPI was the index link, but the CPI has not really kept pace.
I have estimated my return at circa 3.5% AER over the last 5 years.
Obviously no one can predict future, but I feel any of several guaranteed returns would beat my NS&I bond for the year.

The potential problem is if inflation goes up again, you can not buy a new index linked bond.

I see them as a useful and different long term part of a portfolio mix of cash savings, equity, bonds  etc. so I do not compare them directly to what else is available in the short term. 

DavidAC

They are also tax free.