NS&I Index-Linked certificates: new issue, same old rate

Depends how you look at it. The RPI currently stands at 3.7%, so RPI + 1% is 4.7%, and that return is tax free. It's equivalent to 5.9% gross for a standard rate taxpayer, 7.8% to a 40% taxpayer, and 9.4% to a 50% taxpayer. Try getting rates like those in a bank or building society at the moment.

Of course, the return if you buy them now will be based on the RPI at this time next year, and it may be lower by then, but at least you're guaranteed a 1% per annum real return after tax and inflation are taken into account, which I doubt if any bank or building society rate available now will give you.

The very best rate you can get at the moment on a term bond of under 2 years is 3.6%. After tax at 20%, that comes down to 2.9%. For that to beat the inflation-linked savings certificates rate, RPI inflation this time next year would have to be under 1.9%. The gamble is to know whether it will be.

You're quite right. It's a good return. I was simply referring to the fact that there was nothing to get excited about in the "new issue" as it's the same old rate (but still appealing as you point out).

I did a quick calculation over the weekend. If one had invested in

If you've already got the previous issue, though, it does allow you to put away even more of your personal savings absolutely safety at the same rate.

But then, 5 years ago, rates as high as 7% per annum were around on ordinary, taxable term bonds.

The great uncertainty in comparing fixed rate investments and NS&I index-linked bonds is what the RPI over their term will be. And I don't know anyone who knows what it will do except over the short term.

The point of an new issue is that you have another £15,000 limit available to invest in them. Inflation is on the way up, so I think it could be worthwhile investing in them if you are prepared to tie your cash up for 3 or 5 years.

Not so much the safety, but more out of the grasp of HMRC? The irony: protected by one govt dept, and out of the reach of another?

which would be comparable for a 40% tax payer, would it not?

I don't have a crystal ball, but historic figures for 5-year certificates suggest that the index-linked savings certificates outperform the fixed rate certificates

It's 5% to them.

That may be true, but I wasn't comparing with fixed rate NS&I, rather with the best fixed rate building society accounts.

"Jonathan Bryce" wrote

Eh? - Doesn't the BoE reckon it's on the way *down* ? Do you know something which they don't? ;-)