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  • FIRST POST
    • funkey_monkey
    • By funkey_monkey 23rd Jul 17, 12:11 PM
    • 349Posts
    • 25Thanks
    funkey_monkey
    NS&I Index Linked Certificate Renewal
    • #1
    • 23rd Jul 17, 12:11 PM
    NS&I Index Linked Certificate Renewal 23rd Jul 17 at 12:11 PM
    Hi,

    I've got a NS&I Index Linked Cert which had an interest rate of RPI+0.05% over a period of 3 years.
    This has now came to an end and the options now are:

    1. Auto-renew for 3 yrs at RPI+0.01%
    2. Renew for an alternative length @ RPI+0.01%. Options are 2, 3 or 5 years.
    3. Cash in the certificate.
    I've got an estimated value of 20,000 in this cert. I'm unsure what to do - I get the feeling that the poor terms is probably due to NS&I trying to get people out of these - which is probably an incentive to remain within it.


    Can anyone confirm that option 3 is not worth undertaking? I don't need the money at present and I've got savings across the board in shares and saving accounts - so this would be another method of saving.


    Is there any reason why I would invest for anymore than the 2 yr option in the renewal? Do people think that the rate will reduce further and hence it would be better to take it for a longer term?


    Thanks.
Page 2
    • ffacoffipawb
    • By ffacoffipawb 9th Dec 17, 8:40 PM
    • 2,488 Posts
    • 1,641 Thanks
    ffacoffipawb
    These are very good value as the market price of index linked gilts is RPI MINUS around the 1.5% to 2.0% mark. So holders of these are getting significantly more than the market rate. I have always renewed for five years and this year renewed some again that were originally purchased back in 1992. So that will be 30 years come maturity !
    Originally posted by Morphoton
    What was the value in 2017 compared to the original purchase price in 1992? Must have at least doubled??
    • Morphoton
    • By Morphoton 9th Dec 17, 9:57 PM
    • 87 Posts
    • 74 Thanks
    Morphoton
    What was the value in 2017 compared to the original purchase price in 1992? Must have at least doubled??
    10000 in 1992 is now 32614 after 25 years.
    • Davina40
    • By Davina40 5th Aug 18, 3:02 PM
    • 31 Posts
    • 6 Thanks
    Davina40
    If you dont have a better use for the money, renewing for 5 years is a no-brainer.

    Reason being, as long as you time the withdrawal right, you dont lose out on RPI paid, and so you get the same benefits as if you'd signed up to 1,2,3 years without the risk that these will be withdrawn at next renewal, and losing out on a few years at RPI instead of CPI or some other figure.
    Originally posted by AnotherJoe
    I know this is an old thread, found it by googling the same issue.

    My question is, is the above still valid? According to the NSI website, there's a withdrawal penalty of 90 days interest plus losing the index-linking on the whole certificate for the year. Is this a new thing since this thread started?
    • Reed_Richards
    • By Reed_Richards 5th Aug 18, 4:27 PM
    • 119 Posts
    • 44 Thanks
    Reed_Richards
    Given that the interest rate is 0.01%, I would not worry about losing 90 days worth (about 0.0025%). So it all hinges on what is meant by "for the year". Does that mean no loss if you withdraw after exactly 1,2,3, or 4 years as AnotherJoe seems to imply?
    Reed
    • Stubod
    • By Stubod 5th Aug 18, 4:38 PM
    • 499 Posts
    • 367 Thanks
    Stubod
    ..for me it's still a no brainer to roll them on for another period while you still can...index linked / "safe" money. (Unless you need the cash for something else).
    • dividendhero
    • By dividendhero 5th Aug 18, 5:36 PM
    • 244 Posts
    • 262 Thanks
    dividendhero
    It's a general rule in life that deals get worse as time goes on, so regard Index linked bonds I'd renew - it's a no brainer really
    • londoninvestor
    • By londoninvestor 5th Aug 18, 5:43 PM
    • 111 Posts
    • 80 Thanks
    londoninvestor
    According to the NSI website, there's a withdrawal penalty of 90 days interest plus losing the index-linking on the whole certificate for the year. Is this a new thing since this thread started?
    Originally posted by Davina40
    It's new but not that new - it came in sometime between 2011 and 2016, because it wasn't there when I bought my first 5-year certs, and was there when I renewed them.

    I think AnotherJoe's point is as Reed_Richards suggests - i.e. that you can cash in after X years (or perhaps X years + 1 day) with a penalty as close to zero as makes no difference.

    Here are the relevant T&Cs. Para 19 defines that index-linking is credited on the anniversary of buying the cert. And para 61 defines the cashing-in penalty, referring back to para 19 for its definition of "the year in which an early encashment is made".

    My interpretation of that is the same as AnotherJoe's. Cash in on the anniversary (or perhaps the day after) and you only lose the 90 days' interest, i.e. 0.0025% of the principal, i.e. 25p for every 10k that you hold.
    Last edited by londoninvestor; 06-08-2018 at 11:20 AM. Reason: corrected mental arithmetic error as pointed out by ffacoffipawb
    • ffacoffipawb
    • By ffacoffipawb 5th Aug 18, 11:39 PM
    • 2,488 Posts
    • 1,641 Thanks
    ffacoffipawb
    It's new but not that new - it came in sometime between 2011 and 2016, because it wasn't there when I bought my first 5-year certs, and was there when I renewed them.

    I think AnotherJoe's point is as Reed_Richards suggests - i.e. that you can cash in after X years (or perhaps X years + 1 day) with a penalty as close to zero as makes no difference.

    Here are the relevant T&Cs. Para 19 defines that index-linking is credited on the anniversary of buying the cert. And para 61 defines the cashing-in penalty, referring back to para 19 for its definition of "the year in which an early encashment is made".

    My interpretation of that is the same as AnotherJoe's. Cash in on the anniversary (or perhaps the day after) and you only lose the 90 days' interest, i.e. 0.0025% of the principal, i.e. 40p for every 10k that you hold.
    Originally posted by londoninvestor
    I make it 25p not 40p.
    • londoninvestor
    • By londoninvestor 6th Aug 18, 11:19 AM
    • 111 Posts
    • 80 Thanks
    londoninvestor
    I make it 25p not 40p.
    Originally posted by ffacoffipawb
    Duh, of course. Thanks!
    • talexuser
    • By talexuser 6th Aug 18, 12:53 PM
    • 2,433 Posts
    • 1,931 Thanks
    talexuser
    Exactly, cash in just after an anniversary and the loss of interest is insignificant. I still have my rolled over one running as a good, if not the best, cash option for that amount of money.
    • nrsql
    • By nrsql 6th Aug 18, 1:27 PM
    • 1,784 Posts
    • 607 Thanks
    nrsql
    Out of interest, what determines whether they allow renewals or not?
    Originally posted by gatters
    My guess it will be allowed until enough have been dropped that they can cope with the sudden outflow of funds.
    Maybe they will play with the term for which they can be renewed first and start trying to encourage people to drop out.
    Maybe move from RPI to CPI or try negative interest rates on top.

    Another reason for going for 5 years.
    I took out loads of them in smallish tranches which means I get lots of letters now and keep missing the ones that talk about renewals so still have some 3 years. Must look at the site and see what can be done some time.
    • mike678
    • By mike678 7th Aug 18, 9:46 AM
    • 2 Posts
    • 1 Thanks
    mike678
    Like nrsql, I took out loads of these Linkers 15 years ago, making monthly purchases of 1k to buy, alternately, 3-year or 5-year bonds until they were withdrawn. I probably won't touch them until I retire. They earn about 6k tax free; and unlike stocks and shares you get your money back...
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