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Guest absolutezero

Cash Isa Or Ns&i Index Linked Savings Certificates?

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Guest absolutezero

The bulk of my money is in a cash ISA paying 3.2% fixed until November. After that who knows?

I also have about £12,000 in NS&I RPI+1% certificates.

I'm debating whether to continue to pay monthly into the cash ISA or to pay a similar amount into the NS&I RPI+1% over 3 years certificates.

Inflation is currently greater than the interest on the ISA so I'm taking a loss on that.

The BoE reckon inflation is going to drop but we know how accurate their fan charts are...

Inflation is thought, by some, to be fiddled...

Any thoughts?

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My expectation is that the government will tolerate high inflation because it is less painful than controlling it with high interest rates, IMO NS&I index-linked are a one-way bet and cash on deposit will just get eroded away by inflation. I have a lot in them and will add another £30k when the next issues come out, probably about 9 months away as the current pair only came out last month (I think).

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Guest absolutezero

My expectation is that the government will tolerate high inflation because it is less painful than controlling it with high interest rates, IMO NS&I index-linked are a one-way bet and cash on deposit will just get eroded away by inflation. I have a lot in them and will add another £30k when the next issues come out, probably about 9 months away as the current pair only came out last month (I think).

I'm inclined to agree.

The only bad point is that RPI may (or may not) be fudged.

Like the ISA they are tax free.

And even if RPI drops you still get the 1% over 3 years.

Sounds like a fair deal. Probably better than the ISA.

Can anyone clarify what happens at the end of the period if you leave Index Linking Certificates invested rather than cashing in?

Someone said that your holding rolls over onto the next issue of certificates.

But what if you have (say) £45,000 in different issues and the maximum new issue is £15,000? Does your £45,000 roll onto the new issue or is there a limit?

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I'm inclined to agree.

The only bad point is that RPI may (or may not) be fudged.

Like the ISA they are tax free.

And even if RPI drops you still get the 1% over 3 years.

It's better than that. The RPI works only within each year from anniversary date. So if it's 10% inflation year 1 and 10% deflation year 2, theoretically bringing you back to (just about) where you started, you would in fact gain 10% (+1%) yr 1, bank that gain, and then in yr 2 you would gain 0% + 1%. So 12% up (or so) rather than 2% if it just tracked.

Sounds like a fair deal. Probably better than the ISA.

Can anyone clarify what happens at the end of the period if you leave Index Linking Certificates invested rather than cashing in?

Someone said that your holding rolls over onto the next issue of certificates.

But what if you have (say) £45,000 in different issues and the maximum new issue is £15,000? Does your £45,000 roll onto the new issue or is there a limit?

No limit at all, you can have £15k roll-over into the new issue and still buy another £15k the next day in that issue. I have.

My only concern is a hugely fudged RPI, but it would have to be outrageously bad.

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Guest absolutezero

It's better than that. The RPI works only within each year from anniversary date. So if it's 10% inflation year 1 and 10% deflation year 2, theoretically bringing you back to (just about) where you started, you would in fact gain 10% (+1%) yr 1, bank that gain, and then in yr 2 you would gain 0% + 1%. So 12% up (or so) rather than 2% if it just tracked.

No limit at all, you can have £15k roll-over into the new issue and still buy another £15k the next day in that issue. I have.

Thanks for that.

My only concern is a hugely fudged RPI, but it would have to be outrageously bad.

If that ends up happening I think we have worse things to worry about. :ph34r:

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No limit at all, you can have £15k roll-over into the new issue and still buy another £15k the next day in that issue. I have.

Bugger. Says you can only do that once. :(

What are the benefits of keeping a Certificate invested for a further term of the same length?

Firstly, it’s easy – you don’t need to do anything. At the end of the term we’ll make sure your Certificate starts to earn the new guaranteed rates of interest shown in your letter – even if the interest rates on offer for Savings Certificates fall in the meantime. However, if the rates on offer go up between the date of your letter and the end of your Certificate’s term, we promise to pay you the higher rates.

And secondly, we will treat your continued investment as “matured funds”. This means that you can reinvest the full value into a different term or type of Certificate at any time, even if this exceeds the usual £15,000 limit. And it won’t count towards the limit for any new money you might want to invest in the same Issue.

Please note that you can only do this once for each matured Certificate – the usual holding limits will apply for any further reinvestments.

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Bugger. Says you can only do that once. :(

How much are you about to put in? I haven't calculated the theoretical maximum - depends on how frequently they issue as it's not to set timings - but I have £210k nominal in and casting an eye over maturity dates I think it will peak somewhere around £300k nominal before I can cease adding new money to it. Sounds plenty to me.

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The bulk of my money is in a cash ISA paying 3.2% fixed until November. After that who knows?

I also have about £12,000 in NS&I RPI+1% certificates.

I'm debating whether to continue to pay monthly into the cash ISA or to pay a similar amount into the NS&I RPI+1% over 3 years certificates.

Inflation is currently greater than the interest on the ISA so I'm taking a loss on that.

The BoE reckon inflation is going to drop but we know how accurate their fan charts are...

Inflation is thought, by some, to be fiddled...

Any thoughts?

I decided that the most tax efficient method for me was to not use cash ISA's at all. I have 20% of my net worth in NS&I ILSC and then use a S&S ISA (£10,200 limit vs £5,100 for cash ISA) which is now 9% of net worth to hold yellow stuff, emerging markets ETF and a (shock horror) Europe commercial property ETF. Add my pension at 33% of net worth and I have 62% of total net worth invested tax efficiently. As a 40% tax payer it makes a big difference for me.

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Guest absolutezero

How much are you about to put in? I haven't calculated the theoretical maximum - depends on how frequently they issue as it's not to set timings - but I have £210k nominal in and casting an eye over maturity dates I think it will peak somewhere around £300k nominal before I can cease adding new money to it. Sounds plenty to me.

I've got £12,000 in already (a past issue).

I'm thinking of dripping £500 a month or £1000 every two months to try and even out some of the fluctuations in RPI.

In 6 years (or 10 in the case of the 5 year issues) what do you do when you've rolled over once and you can't do it again?

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Guest absolutezero

I decided that the most tax efficient method for me was to not use cash ISA's at all. I have 20% of my net worth in NS&I ILSC and then use a S&S ISA (£10,200 limit vs £5,100 for cash ISA) which is now 9% of net worth to hold yellow stuff, emerging markets ETF and a (shock horror) Europe commercial property ETF. Add my pension at 33% of net worth and I have 62% of total net worth invested tax efficiently. As a 40% tax payer it makes a big difference for me.

I too am coming round to the conclusion that cash ISAs are a scam...

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I too am coming round to the conclusion that cash ISAs are a scam...

Worth keeping them though as you can't put it back in if you take it out.

We're getting a bit over 3%, from memory, which equates to about 4% on a normal taxed account.

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I've got £12,000 in already (a past issue).

I'm thinking of dripping £500 a month or £1000 every two months to try and even out some of the fluctuations in RPI.

In 6 years (or 10 in the case of the 5 year issues) what do you do when you've rolled over once and you can't do it again?

I then take the interest and use the nominal to invest in the next issue, as the peak is about £300k by my estimation that's as much as I would want to put into these bonds so I don't see the bar on secondary reinvestment as a problem. At that point they are paying me a tax-free annual income in cash, which would have been £18k this year. I can live with that.

They are a one-way bet at the moment but circumstances change and part of the appeal is that I can pull all that money out at a moments notice, and as long as I leave the current year's £30k in then there is no interest penalty.

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Worth keeping them though as you can't put it back in if you take it out.

We're getting a bit over 3%, from memory, which equates to about 4% on a normal taxed account.

I disagree as I expect interest rates to fail to keep pace with inflation, as is currnetly happening. I see them as a good way of losing money slightly less slowly than by having it in a deposit account.

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I disagree as I expect interest rates to fail to keep pace with inflation, as is currnetly happening. I see them as a good way of losing money slightly less slowly than by having it in a deposit account.

I can live with losing a couple of percent a year, in real terms, for a year or two in instant access deposit accounts. The alternatives, shares, property etc are just too risky, liquidity is the key ;).

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