NS&I to shaft savers again. RPI to CPI (index linked bonds)
Comments
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interesting point.londoninvestor wrote: »Your idea makes a lot of sense in general. On this point though, one thing to think about is that index-linked gilts also provide a mostly tax-free return. The coupons are taxed as interest. But most of the return doesn't come from the coupon, it comes from the capital gain as the principal accretes with inflation - and gilts are exempt from CGT, so that gain is tax-free.
So currently, the tax "advantage" of ILSCs is really just that your 0.01% of interest is exempt from tax.
the taxation of index-linked gilts is a perhaps a bit anomalous. i haven't really thought about whether or how it should be changed, though. (i'm not quite sure if index-linked corporate bonds are taxed the same way?)
a detail: with the current prices of index-linked gilts, you won't get all the index-linking tax-free, in that you will pay tax on the full coupon and then get a capital loss (perhaps not a loss in GBP, but a loss relative to RPI) which can't be offset against anything for tax purposes. and this is not always something that evens out over the lifetime of the gilt (i.e. if you bought at issue, you'd have a gain today, which will be given up again when it reaches maturity), because additional tranches of existing index-linked gilts have be sold at a long way above their face value.0 -
short_butt_sweet wrote: »a detail: with the current prices of index-linked gilts, you won't get all the index-linking tax-free, in that you will pay tax on the full coupon and then get a capital loss (perhaps not a loss in GBP, but a loss relative to RPI) which can't be offset against anything for tax purposes. and this is not always something that evens out over the lifetime of the gilt (i.e. if you bought at issue, you'd have a gain today, which will be given up again when it reaches maturity), because additional tranches of existing index-linked gilts have be sold at a long way above their face value.
True. We should probably say that current ILSCs (completely tax free) are more favourable than IL gilts (income tax on the coupon which is typically 0.05% - 1% of accreted notional - with one outlying 2022 gilt up at 1.29%), which would be more favourable than ILSCs which were completely taxable.short_butt_sweet wrote: »interesting point.
the taxation of index-linked gilts is a perhaps a bit anomalous. i haven't really thought about whether or how it should be changed, though. (i'm not quite sure if index-linked corporate bonds are taxed the same way?)
Now this gets more interesting again
The CGT exemption per se is just for gilts (both conventional and linkers).
However a corporate index-linked bond may be caught by the Deeply Discounted Securities rules, which effectively convert capital gains into income for tax purposes. See example 1 in HMRC's manual. Gilts (other than strips) are specifically excluded.
Those rules would also apply to bonds issued with a low coupon, but where a rising rate environment causes them to trade at a discount to par, so that most of the return comes from the payment at maturity. That makes some economic sense I'd say - if I buy a bond now, I'm doing so based on its yield now and I don't care too much what it yielded when I was issued. So a fully taxable ILSC would be in line with that principle - just not with how IL gilts currently work. (I also haven't thought that much about what the ideal treatment would be!)0 -
Ranking by WealthC_Mababejive wrote: »We are digressing slightly but its all interesting stuff. The article says its a subsidy for the rich but what is rich? Who is rich? How much nett worth do you have to have to be considered rich? Its subjective. I'd say multimillionaires are rich.
To reach the top 1% worldwide in terms of wealth – not just income but all you own – you’d have to possess $770,000 in net worth, which includes everything from the equity in your home to the value of your investments. That’s equal to roughly:
£593,539
671,451 euros
56.3 million Indian rupees
5.3 million Chinese yuan
See more here https://www.investopedia.com/articles/personal-finance/050615/are-you-top-one-percent-world.asp0 -
ok. so IL gilts are perhaps being treated a bit softly for tax, since they escape the Deeply Discounted Securities rule, and it catches IL corporate bonds.londoninvestor wrote: »The CGT exemption per se is just for gilts (both conventional and linkers).
However a corporate index-linked bond may be caught by the Deeply Discounted Securities rules, which effectively convert capital gains into income for tax purposes. See example 1 in HMRC's manual. Gilts (other than strips) are specifically excluded.
Those rules would also apply to bonds issued with a low coupon, but where a rising rate environment causes them to trade at a discount to par, so that most of the return comes from the payment at maturity. That makes some economic sense I'd say - if I buy a bond now, I'm doing so based on its yield now and I don't care too much what it yielded when I was issued. So a fully taxable ILSC would be in line with that principle - just not with how IL gilts currently work. (I also haven't thought that much about what the ideal treatment would be!)0 -
capital0ne wrote: »Ranking by Wealth
To reach the top 1% worldwide in terms of wealth – not just income but all you own – you’d have to possess $770,000 in net worth, which includes everything from the equity in your home to the value of your investments. That’s equal to roughly: £593,539
An interesting figure but surely pulled down by the vast amount of destitute poverty around the world. 600 grand including your home/pension is not particularly rich in terms of the UK, though obviously a lot richer than people on minimum wage, renting, on benefits etc. Rich in the UK would be the top 10%, 1% and 0.1% depending on your point of view. I think the last time I read the top 10% total wealth here started around 1.2 mil?0 -
An interesting figure but surely pulled down by the vast amount of destitute poverty around the world. 600 grand including your home/pension is not particularly rich in terms of the UK, though obviously a lot richer than people on minimum wage, renting, on benefits etc. Rich in the UK would be the top 10%, 1% and 0.1% depending on your point of view. I think the last time I read the top 10% total wealth here started around 1.2 mil?
Agreed,whilst the data is interesting it should be more localised. As it stands I'm in the 1% but i dont feel that wealthy..Feudal Britain needs land reform. 70% of the land is "owned" by 1 % of the population and at least 50% is unregistered (inherited by landed gentry). Thats why your slave box costs so much..0 -
C_Mababejive wrote: »Agreed,whilst the data is interesting it should be more localised. As it stands I'm in the 1% but i dont feel that wealthy..
Feely wealthy is comparative to those around you.
If I had the means to buy a £2m flat in central London I would know full well that everyone else in the building had spent £2m on theirs, and their Rolls Royce etc would make my bicycle look cheap. I'd also be window-shopping for the £10m flats on the next street. I wouldn't feel wealthy then.0 -
Taking their time to update the ILSC calculator to the November figures......0
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Anyone know how to download a list of the certificates from the NS&I site?
I had a look at the NS&I site and for ILSCs, they do give a statement on maturity, and at each anniversary, of the current value of each certificate. (This is in the 'your profile > your documents' section, but it's a pain as you have to go in and select the certificate that you want to view documents for individually, they don't just list all the available documents).
What I couldn't see is a list of all the certificates and current values which I used to get (on maturity of each certificate) before I went paperless. What I think they have replaced it with is a list of all certificates under 'your accounts > your dashboard' but I can't see a way to print them all out. But as others have said, NS&I will send you a printout if you call and ask.0 -
There appears to be a parliamentary petition at bit/ly/save_rpi to try and reverse this.0
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