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Frank Mason

Ns&i Index Linked Bonds

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Hi all,

Not sure if any of you have looked at NS&I Index-Linked Savings Certs (Bonds?). I know that they pay back 1.35% above RPI and that it is tax free, the catch being you have to keep them for a minimum of 1 year and can only invest in £15K per issue (annum?)

Anyone got any comments on them? Is the RPI value easy to get hold of? And is it calculated weekly/monthly/yearly? Is it likely to go up as inflation is seen by commentators to be on the increase.

Thanks

Frank

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Guest Bart of Darkness

Hi Frank,

Take a look at this post

Link

and the replies to it.

The bit that caught my eye was:

Because Index-linked Savings Certificates offer a tax-free return that beats inflation, it makes them particularly attractive for basic as well as higher rate taxpayers. Assuming the RPI remains at its current rate of 4.8% p.a. over the term of the certificates, basic rate taxpayers would need to find a taxable product paying a net rate of 7.68% to match this rate, and higher rate tax-payers similarly 10.25%.

http://www.easier.com/view/Finance/Savings...cle-111237.html

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Hi Frank,

Take a look at this post

Link

and the replies to it.

The bit that caught my eye was:

http://www.easier.com/view/Finance/Savings...cle-111237.html

Hi,

Many thanks for the info', I guess my main question is.... does the RPI fluctuate frequently? Is this value going to be affected by BoE base rates? I know that interest rates are linked to inflation, is it possible the RPI could go down low and so I'd be locked into a losing position?

Just call me double cautious!

Ta

Frank

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Frank, here's a table with historic RPI values:

http://www.statistics.gov.uk/StatBase/tsda...ore=N&All=Y

The CZBH column shows the percentage change over 12 months. Compared with the last ten years, RPI is quite high. What I imagine you should be looking at with regards to buying these certs is the average trend over a year as certs that are cashed in before a year is out earn no interest.

But as Bart says, the tax-free benefits really do make them look very attractive even if inflation drops.

What rate would RPI need to drop to to make them uncompetitive with say the 5.95% interest rate at Icesave for a basic / higher rate taxpayer? I'm too lazy to work it out at the minute (about to be dragged to Sainsbury's too :P)

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Guest Bart of Darkness
I guess my main question is.... does the RPI fluctuate frequently? Is this value going to be affected by BoE base rates? I know that interest rates are linked to inflation, is it possible the RPI could go down low and so I'd be locked into a losing position?

Good question. As christh says, you may only need to consider the average trend over a year. Although these certs run for 3 or 5 years, you only lose any interest earned if you pull out before the end of the first year.

What rate would RPI need to drop to to make them uncompetitive with say the 5.95% interest rate at Icesave for a basic / higher rate taxpayer? I'm too lazy to work it out at the minute (about to be dragged to Sainsbury's too :lol: )

I'm betting someone on here will come along with the answer soon (I'm both lazy and not up to the job alas :( ).

Edited by Bart of Darkness

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IMO these look excellent - and I've just transferred 10k out Icesave to pop into some of these bonds.

As far as I can see the limit is not 15k per year, but 15k per ISSUE, with a few issues per year, so you may be able to invest 45k per year or more.

Yes RPI could fall back, but IMO unlikely to fall enough to make these less worthwhile than a regular account over the next year. After 12months you are free to cash them in (and of course you would only do so if you either needed the cash, or there were better returns to be had) :)

Edited by Pete95

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Good question. As christh says, you may only need to consider the average trend over a year. Although these certs run for 3 or 5 years, you only lose any interest earned if you pull out before the end of the first year.

I'm betting someone on here will come along with the answer soon (I'm both lazy and not up to the job alas :( ).

Maybe you could modify the NS and I calculator ?

Edit: the spreadsheet is protected!

http://www.nsandi.com/products/ilsc/cashva...lues_june07.xls

Edited by Ash4781

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Maybe you could modify the NS and I calculator ?

Edit: the spreadsheet is protected!

http://www.nsandi.com/products/ilsc/cashva...lues_june07.xls

I'm going to go for it, put £15K and then buy some more at the next issues. Better than 5-6% in a savings a/c and to quote someone....

It's not return on investment, it's return OF investment!

Thanks all

Frank

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Guest Bart of Darkness
I'm going to go for it, put £15K and then buy some more at the next issues. Better than 5-6% in a savings a/c and to quote someone....

It's not return on investment, it's return OF investment!

Thanks all

Frank

Better than leaving it underused in a low IR account like some utter idiots.

(Step foward Bart of Darkness! :( )

I'm going to do the same, no more shilly shallying.

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Bear in mind that there's a three year and a five year issue, so even if there only happens to be one issue of each per year, that's still 30k you can stash. I bought the three year issue at the end of April, and my money wasn't debited until two weeks later, (the date you apply, happily, is the one from which the cert begins).

When I phoned to find out what was going on, the reply was simply that massive public demand was slowing down the processing of applications.

Term Tax-free

rate pa/AER Equivalent gross rates*

3-year 15th Issue

Guaranteed compound rate over 3 years Index-linking + 1.35% Index-linking + 1.69% basic rate, 2.25% higher rate

5-year 42nd Issue

Guaranteed compound rate over 5 years Index-linking + 1.35% Index-linking + 1.69% basic rate, 2.25% higher rate

Year by year rates

3-year 15th Issue

purchase price + Index-linking for year 1 + 1.1% of purchase price = 1st anniversary value

1st anniversary value + Index-linking for year 2 + 1.3% of 1st anniversary value = 2nd anniversary value

2nd anniversary value + Index-linking for year 3 + 1.66% of 2nd anniversary value = maturity value

5-year 42nd Issue

purchase price + Index-linking for year 1 + 0.95% of purchase price = 1st anniversary value

1st anniversary value + Index-linking for year 2 + 1.15% of 1st anniversary value = 2nd anniversary value

2nd anniversary value + Index-linking for year 3 + 1.35% of 2nd anniversary value = 3rd anniversary value

3rd anniversary value + Index-linking for year 4 + 1.55% of 3rd anniversary value = 4th anniversary value

4th anniversary value + Index-linking for year 5 + 1.76% of 4th anniversary value = maturity value

TLM

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IMO these look excellent - and I've just transferred 10k out Icesave to pop into some of these bonds.

As far as I can see the limit is not 15k per year, but 15k per ISSUE, with a few issues per year, so you may be able to invest 45k per year or more.

Yes RPI could fall back, but IMO unlikely to fall enough to make these less worthwhile than a regular account over the next year. After 12months you are free to cash them in (and of course you would only do so if you either needed the cash, or there were better returns to be had) :)

i was wondering about the amount of issues aswell - how many issues are there typically per year??

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i was wondering about the amount of issues aswell - how many issues are there typically per year??

I've got three of these and will be piling into a fourth when I free up some share options. It's the closest thing to free money I've found!

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I've got three of these and will be piling into a fourth when I free up some share options. It's the closest thing to free money I've found!

all this year?

also, what heppens when they mature? the site says they can be reinvested into another certificate but doesn't make it clear how that works - does it all go into a new cirtificate or only (upto) 15k?? in which case what happens to the rest?

cheers

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Well it's payday for me and I've bought a fat stack of tasty NS&I Saving Cert issue 15s! Yum yum yum.

Aardvark I had a look at the T&Cs a while ago and I believe that after the certs mature (3 / 5 years) they earn a crappy interest rate until you put them into a new issue. There's probably a way to reinvest them in a new issue without having to reapply - or you could just cash them out and pay into a new issue.

Ah what the hell, here we go:

Retention after the fixed rate term

44. After the original term (or any further term for which index-linking and/or interest is earned under this paragraph), a Certificate may be eligible to earn index-linking and/or interest for a further term of the same length. The Treasury will decide whether this will apply and if so, on what terms as to index-linking and/or interest. The Director will write to the holder, at the last recorded address for the holding, shortly before the end of each term to tell them of the Treasury’s decision. If such index-linking and/or interest does apply it will be applied automatically and will be guaranteed for the whole of the further term but, of course, the holder will remain free to cash in the Certificate at any time (including for reinvestment into another Issue or another NS&I product).

http://www.nsandi.com/products/ilsc/tandc.jsp

A further benefit of reinvested certs is that you can cash them in at any time after maturity and still earn interest even if they haven't been held for a full year.

Edited by christh

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Well it's payday for me and I've bought a fat stack of tasty NS&I Saving Cert issue 15s! Yum yum yum.

Aardvark I had a look at the T&Cs a while ago and I believe that after the certs mature (3 / 5 years) they earn a crappy interest rate until you put them into a new issue. There's probably a way to reinvest them in a new issue without having to reapply - or you could just cash them out and pay into a new issue.

Ah what the hell, here we go:

http://www.nsandi.com/products/ilsc/tandc.jsp

A further benefit of reinvested certs is that you can cash them in at any time after maturity and still earn interest even if they haven't been held for a full year.

Have a look here to see how much more tax-free saving you can do..... Not too keen on the Fixed Interest Saving Certs though.

Tax Free Savings

Frank

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Anyone got a solid answer on how many 'issues' there are each year? Can you top them up in installments?

It's usually 2 or 3 of each issue a year , there is no warning they just come out with them , the latest ones came out on 25th April they were i believe the first ones this year so should be more soon , but none were issued for this latest rate rise in July . Installments yes by DD , just phone them up and bombard them with questions 0500 500 000 up to midnight 7 days a week .

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Thanks I had just added a 2nd £1000 installment and it reports that both are in issue 15. I hope they announce these when they come out.

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