National Savings Index-Linked Certificates

By John Swindells 14 May 2011 | Comment
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If you are a UK taxpayer then you will want to take a look at the new National Savings certificates that promise to match or beat the RPI (retail prices index). They are also backed by the Treasury, so you can be sure that all the money you invest is safe. You can invest up to a total of £15,000 in each Issue.

With NS&I Index-linked Savings Certificates your investment will grow in spending power each year, no matter what happens to the cost of living. You hold these Index-linked Savings Certificates for a set time called a 'term', for example five years; they are are lump sum investments. Hold them for the whole investment term to receive the full compound interest. It's worth bearing in mind that these National Savings & Investments (NS&I) Index-Linked Certificates were withdrawn in July 2010, so may withdrawn again in future.

The potential returns look especially appealing for higher rate taxpayers, but it really depends on what the average annual RPI will be over the next 5 years. You could compare it to current 'best buys' of around 3% variable or 5% fixed for 5 years, but of course variable account interest rates may rise too. The fixed rate bonus isn't 0.5% a year throughout, it starts at 0.25% for the first year and gradually rises to 0.86% in the final year to average 0.5% annual interest overall.

There are two ways your money grows: fixed interest and any positive index-linking – added on each anniversary of your investment. The index-linking is taken from "the RPI figures that apply to your Certificate at the start and end of each year of investment (not the monthly changes in between)". An important safety net is that if the index-linking is negative (ie, we have 'deflation') then the value of your investment won't go down.

To find out more, and to apply, visit the nsandi.com website.

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by Loans 300 on 17 May 2011
NS&I Index-linked Savings Certificates are also named as Inflation-Beating Savings. They are made in order to give savers a guaranteed tax-free rate of return, higher than the rate of inflation measured by the Retail Prices Index (RPI), if held for the full certificate term.

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