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Index Linked Isa Help Needed


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Does anyone know of anyone providing a Index linked ISA?

I know about [email protected] Index Linked certificates. I am loaded up on them but I am wondering if there is anywhere I can put my ISA allowance.

Currently the only people doing them as far as I can see is National Savings.

Britannia, Leeds and Newcastle Building Societies sometimes do them, but they aren't doing them at the moment. Note that they count as cash ISAs, not equity ISAs.

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Buy index-linked gilts in a self-select equity ISA? Not quite the same but close enough if you plan to hold for a long period.

E.g. '1.25% index-linked treasury gilt 2017' if bought on Friday would get you approx 1.1% + RPI, if held until it matures on 22/11/2017. The risk with buying gilts, is that if you have to sell (rather than wait for maturity) you may get back less than you originally invested.

Index-linked gilts pay interest every 6 months - which can be reinvested automatically, or used to buy an alternative investment.

Also don't forget that index-linked gilts are capital-gains tax free, even outside of an ISA. You have to pay income tax on the interest payments, but index-linked gilts are designed to provide a capital gain equivalent to the RPI-linkage - this index-linking gain is tax free.

Edited by ChumpusRex
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  • 2 weeks later...

I wonder if the problem is that because the annual inflation measures are falling the building societies don't think there is a market for index-linked products.

Maybe we should start emailing the building societies that have offered index-linked ISAs in the past asking if they would consider new issues - perhaps if they see some interest in this type of account they might respond.

Edited by subspace
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Buy index-linked gilts in a self-select equity ISA? Not quite the same but close enough if you plan to hold for a long period.

E.g. '1.25% index-linked treasury gilt 2017' if bought on Friday would get you approx 1.1% + RPI, if held until it matures on 22/11/2017. The risk with buying gilts, is that if you have to sell (rather than wait for maturity) you may get back less than you originally invested.

Index-linked gilts pay interest every 6 months - which can be reinvested automatically, or used to buy an alternative investment.

Also don't forget that index-linked gilts are capital-gains tax free, even outside of an ISA. You have to pay income tax on the interest payments, but index-linked gilts are designed to provide a capital gain equivalent to the RPI-linkage - this index-linking gain is tax free.

A few wrinkles to add to this basically sound strategy:

The annual limit for a self-select ISA is £7200, or £10200 if you are 50+, twice that for a cash ISA, attractive if you are flush.

Even if held to maturity, there's still a theoretical chance that you could get back less than you paid, if we have prolonged deflation.

You can buy and sell them within your ISA, giving you an exit strategy if deflation takes hold.

Within an ISA you must buy Gilts that are at least 5 years from maturity at the time of purchase.

The dividends ("interest" if you prefer) are paid gross and are tax-free within the ISA, unlike dividends from equities.

The BoE pension fund is reportedly heavily invested in UK Index-linked Gilts.

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Is this a service which might or might not be provided by the ISA manager, or does the DMO do it as an option for all Gilt holders?

I can't find anything about it on the DMO website.

This is a standard service provided by stockbrokers for any appropriate dividend bearing investment, and most brokers have a special deeply discounted commission for it (e.g. no point in pay £10 commission for a £100 dividend reinvestment - most brokers would reduce their commission to £1 for this value of automatic transaction). If you hold a shares ISA through a stock broker, then you can get this option.

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This is a standard service provided by stockbrokers for any appropriate dividend bearing investment, and most brokers have a special deeply discounted commission for it (e.g. no point in pay £10 commission for a £100 dividend reinvestment - most brokers would reduce their commission to £1 for this value of automatic transaction). If you hold a shares ISA through a stock broker, then you can get this option.

Thanks CR.

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Don't forget there are quite a few gilts unit trusts which you can put in an ISA or SIPP. I have holdings of the L&G index linked and non index linked gilts. They pay out dividends periodically.

Some corporate bond funds invest in gilts as well.

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Don't forget there are quite a few gilts unit trusts which you can put in an ISA or SIPP. I have holdings of the L&G index linked and non index linked gilts. They pay out dividends periodically.

Some corporate bond funds invest in gilts as well.

Also don't forget the I-L Gilt ETF, code INXG

http://www.google.co.uk/finance?client=ob&q=LON:INXG

This ETF gives weighted exposure to short dated I-L Gilts, which is otherwise difficult within an ISA

Note: I-L Gilts going up sharply today, must be this thread!

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