NS&I 5 Year Index Linked Savings Certs vs Cash ISA over 5 years?

boco803

I appreciate no crystal ball etc., but with the way things are and assuming no need to access funds in the next 5 years, what would you be inclined to do?

Leave funds invested in a 5 year ILSC term or withdraw and maybe invest into fixed rate cash ISAs every year (starting with 20k 2026-27) - with the balance in an easy access for now?

Hattie627

A lot depends on what other savings you have but I'd go with the ILSC but for a 3 year term not 5 years.

Ayr_Rage

Forget cash and invest in a S&S ISA

InvesterJones

https://forums.moneysavingexpert.com/discussion/comment/82026962#Comment_82026962

But invest in what in the S&S ISA? There's the whole range from money market funds (like cash), commodities, to equities.

For me, 5 years is too short for 100% equities, so depending on other securities, I'd either go for a multi-asset fund, or simply a 5-year gilt if you want something guaranteed.

Ayr_Rage

https://forums.moneysavingexpert.com/discussion/comment/82027059#Comment_82027059

Pick a large Investment Trust and let their stock pickers do the hard work for you.

Alliance Witan, Bankers, City of London etc

Albermarle

You could always withdraw some to put into savings accounts/cash ISAs, and reinvest some in ILSC.

So hedging your bets.

InvesterJones

https://forums.moneysavingexpert.com/discussion/comment/82027120#Comment_82027120

Size of trust isn't a good way to decide investment - the largest investment trust is the very tech/future focused SMT - pretty risky for a 5-year time frame.

Ayr_Rage

https://forums.moneysavingexpert.com/discussion/comment/82027227#Comment_82027227

OK, a large, diversified IT, does that make you happier?

DRS1

Isn't this the sort of question asked by people investing in gilts? Do I invest in a conventional gilt (or the 5 year fixed rate cash ISA) or an index linked gilt (the ILSC). It comes down to what do you think inflation is going to do over the next 5 years. I have no clue but if ILGs are thinking inflation over 5 years will average 3.7% pa and you can get a 5 year fix at 4.8% pa then maybe the 5 year fix is not bad. But of course you get the index linked product to protect you against spikes in inflation (like we had in 22 and 23).

Oh and doing a series of 1 year fixes may or may not work out better than a longer term fix. It is unusual for 1 year fixes to be better than 5 year fixes at any point in time but if you had done a 5 year fix say 6 years ago you would have been stuck in a very low paying account while interest rates went up and up. Do we think interest rates will go up from here? No idea. I have done some 1 year fixes recently because the rates are higher than the longer fixes but normality seems to be returning so longer fixes are getting better rates now (or at least similar to the 1 year fix rates).

InvesterJones

I'd guess the 'every year' comment was more about ISA contribution limits than trying to do a series of 1-year fixes, it might be more akin to one 5-year, one 4-year, one 3-year etc. which is where gilts could come in - buy a series of gilts that mature in time for each year's ISA contribution.

DRS1

OP I think there is a thread on here somewhere pointing out that if you are thinking of renewing an ILSC then you should maybe think about an ILG instead. ILGs are currently giving a better return than ILSCs. The trouble is they look complicated and they are not completely tax free (the coupon is subject to income tax and if you buy outside an ISA then you have the accrued income scheme to think about). On the plus side you are not locked in until maturity (although if you do sell before maturity there is no guarantee how much you will get).