Next issue NS&I index linked certs

Sillychuckie

Why are these so attractive? Can someone please convince me or explain what I am missing?

Even as a high rate tax payer... I earn FAR MORE on a top bond investment (7% guaranteed), less my 40% taxed interest than what these would return with the average/expected, tax free rate.
Surely, if you hunt around, you will almost always be able to find a best rate bond that beats these products... no?
I know the RPI varies month to month, but it would have to be massively high with the current issue to beat the 7% AER at A&L for example, or even the 6.90% elsewhere... even when tax is taken into account.

THx.

Lavendyr

7% taxed at 40% = 4.2% net.

Inflation (RPI Dec 07 = 4%) +1.35% = 5.35% net (tax-free).

Obviously, whether they are good value or not depends on inflation, but at the moment they are a very good idea.

martinman3

Lavendyr wrote: »

7% taxed at 40% = 4.2% net.

Assuming of course that you disclose it on your tax return.;)

I personally believe that a lot of people don't and think that HMRC will never find out.

phoebe03cat

Appreciate the posts above-makes it nice and clear, thanks. So for my daughter who doesn't pay tax yet, a high savings account is a better way to go I quess.

barak

Lavendyr wrote: »

.....However, the cash must be left there for at least three years ..... so this isn't for someone who wants a short term place to save.....

They can be cashed at any time, but won't get any index-linking or interest until the first anniversary, and don't get the full quoted return until maturity. [I'm sure I posted this already somewhere ]

For example -
3-year 15th Issue
Purchase price + I/L for year 1 + 1.1% of purchase price = 1st anniversary value
1st anniv. value + I/L for year 2 + 1.3% of 1st anniv. value = 2nd anniv. value
2nd anniv. value + I/L for year 3 + 1.66% of 2nd anniv. value = maturity value

See http://www.nsandi.com/products/ilsc/rates.jsp

Lavendyr

I was just quoting Martin, I agree that you can cash-in but it's not worth doing so really (unless obviously you don't realise you're going to need the money) - if your intention is to save somewhere with easy access, better to put your money somewhere that won't penalise you so heavily for withdrawing.

ManAtHome

Works quite well - after the first year you can either cash in ( at least RPI+1% ish) or keep it running (depending on how RPI is being fudged), you don't get the same chance with other fixed-rate savings accounts. Would have to be over 8% gross for a higher-rate taxpayer, or even someone near the top of standard rate.

nrsql

Sillychuckie wrote: »

Why are these so attractive? Can someone please convince me or explain what I am missing?

Even as a high rate tax payer... I earn FAR MORE on a top bond investment (7% guaranteed), less my 40% taxed interest than what these would return with the average/expected, tax free rate.
Surely, if you hunt around, you will almost always be able to find a best rate bond that beats these products... no?
I know the RPI varies month to month, but it would have to be massively high with the current issue to beat the 7% AER at A&L for example, or even the 6.90% elsewhere... even when tax is taken into account.

THx.

Currently first year of 3yr index linked returns 5.1% which is the equivalent of 8.5% taxed at 40%.
In the third year it would be 5.66% - equivalent to 9.43% taxed.
Average over the 3 years is 5.35% - equivalent to 8.92% taxed.

This has gone down over the last month (think by .4%) but you would still struggle to beat it with taxed savings.

They are best in the last but curretly good even in the first year. There's no guarantee as to how they will do in future but at the moment are good value.
Be aware that if you cash them in during the first year you will get no interest - after the first year (or for re-invested certs) you would receive the interest accrued at the end of the previous month.

knights

Hi, I am not fully up to speed on this type of investment, which may be reflected in my questions.

1. Are you saying you can open a 3 year index linked account and if after 1 year or anytime thereafter you can withdraw some or all of your money and only lose 1 months interest on your withdrawal, if so what's the 3 year bit?, is there a bonus or other incentive for keeping it in that long?

2. Once opened can you add to it, if so and if you do then does that individuel amount then have to be in a full 12 months before you touch it without losing all interest?

3. What happens after 3 years, is the issue then closed and do you then to have to move your money whatever happens?


regards

Jonbvn

Lots of questions on these, so best to post some links:

General info

How they work

Are they right for me?

What happens at maturity?

Terms & Conditions