NS&I Index-Linked certificates - changing terms?

boco803

Sorry for silly question, but is there any downsides to changing the term from 5 years down to 3 years at maturity?

I see the both pay CPI + 0.01% so the reward is the same, so earnings should be comparable year on year? Or have I missed something?

I assume a 3 year term is probably a better bet as not locked in?

Also, does anyone know if I left it to auto-renew to a 5 yr term or amend it now to a 3 yr term, am I able to amend the term within the first 30 days of renewal or is that just for complete cancellation for funds to be returned?

Stubod

No real downside other than if the (gov.), do decide to stop them at some point, thenif you have a 5 year one you will gain another 2 years over having a a 3 year bond.

Originally all ours were 5 years, but now we are getting older and may need the money sooner, with no option to withdraw early we are changing them all to 3 years when the are due for renewal, (as well as taking some of the money out).

The recent change to no withdrawls and the fact they have not u=issued any new ones for a while suggests they are trying to close them down by "natural wastage"?

masonic

https://forums.moneysavingexpert.com/discussion/comment/81998391#Comment_81998391

Not necessarily. If they decide to stop close to the expiry of your 5 year one, then the 3 year one would already have been renewed and would run for an extra year. If they decide to stop in about 10 years time, then the 3 year one would already have been renewed twice and run for two extra years. You are more likely than not to get a bit more out of 5 year terms, but it could go either way.

boco803

Thanks for your replies both.

Part of me wants to withdraw and stick it into an ISA (with the rest in a standard fixed rate), but on the other hand, it may be worth holding onto despite the (currently) lower returns as they're no longer on sale?

As a side note, when I attempted to change to a different term under maturity options, it came up with an error message - anyone else encountered this?

Hattie627

My maturity date for a (5 year) ILSC was yesterday (14th May). I have renewed for 3 years, new maturity date May 2029.

As these are no longer on sale, I decided that it was best to renew (although for a shorter term) rather than to cash in.

I was mindful of the fact that I cannot access the funds until 2029 and that the return will not exceed CPI inflation over the term (ignoring the tiny interest rate above the inflation return). Against these two points, I am fortunate to have enough liquid assets to meet any needs I am likely to have over the next 3 years, plus substantial holdings in stocks and shares ISA's which may beat inflation. The ILSC is only a small proportion of my total savings and investments.

Also I take into account that the return on the ILSC is tax-free. As a 40% (soon to be 42%) taxpayer on return exceeding £500 per year on my non-ISA savings and investments, and with the ISA subscription maxed out year, plus maximum holding in premium bonds, so anything tax-free is useful.

DRS1

https://forums.moneysavingexpert.com/discussion/comment/81999676#Comment_81999676

Also I take into account that the return on the ILSC is tax-free. As a 40% taxpayer on return exceeding £500 per year on my non-ISA savings and investments, and with the ISA subscription maxed out year, plus maximum holding in premium bonds, so anything tax-free is useful.

As @masonic has mentioned on another thread you may want to think about Index Linked Gilts. OK the coupon is subject to income tax but coupons on ILGs are peanuts. The capital gain on maturity is CGT free. You would probably want to hold until maturity but you don't HAVE to - so if you need the money sooner you could cash them in by selling unlike the ILSCs. No guarantee what price you would get if selling though.

badger09

https://forums.moneysavingexpert.com/discussion/comment/81999595#Comment_81999595

Maturity date on my 5 year Index Linkers is 31 May. I recently used online maturity options to partially reinvest for a shorter period, with no problem.
Original investment in 2011 was £15k. Maturity value £25k ish. As they are no longer on sale, decided to reinvest £20k but @ 76, 3 years is long enough. I don’t need the £5k so it will be added to my ‘gifting pot’

talexuser

I cashed in. Locking in did it for me, no good as a cash home for emergencies even for the higher tax advanatge.

masonic

https://forums.moneysavingexpert.com/discussion/comment/81999942#Comment_81999942

Out of interest, what will you now do with the cash?

talexuser

Split it between the kids for their family expenditure, and hope I live for another 7 years. Seems pointless to wait until I pop off for them to have an easier life. Its been sitting there for 15 years now reinvested and never needed so might do some good the way prices are going.

The inflation link might well have done well if the present poor UK perfomance continues and I don't see any miracles on the horizon to change that, but locking away part of the emergency cash float was a deal breaker for me.

homestraight

I took mine out too. End of an era.

Didn't desperately need it but funded a business investment rather than borrowing for it. I think I'll earn more that way even after tax but we'll see

Just made the cashflow and proof of funding process a bit easier too.