The Lemon Fool

All my savings certificates (which are all index-linked) are now paying 0.01% + indexation. About 66% are still on RPI indexation, but that will reduce over time as they roll over into certificates that are indexed against CPI
0.01% is just paltry, but I'm hanging on because I reckon there's still value in them, and benefits are

• No fees or need for a financial adviser
• Guaranteed/backed by Govt
• separate from any FSCS ordinary bank account compensation limit (FSCS currently £85k) NS&I is umlimited https://www.nsandi.com/get-to-know-us/security/protect-your-money
• Tax-free: no income tax or CGT (and no need to enter on tax return) (but will be included in your estate for IHT purposes; however, savings certificates can be inherited intact by your beneficiaries)
• Inflation linked

I'm maxed out on my ISA subscriptions, already have more than £85k in cash savings, generally use up my annual CGT allowance, so I treat savings certificates as just another string in the bow (or whatever the expression is).

Comments welcome for any flaws in the above or if I've missed the Bleeding Obvious...

yorkshirelad1 wrote: if I've missed the Bleeding Obvious...

One thought on this. If you invested directly in Indexed Gilts, the price you would pay is likely to give a return less than the Index to which they are linked. From that restricted viewpoint, the Certificates are better value at zero real return.

yorkshirelad1 wrote:
Comments welcome for any flaws in the above or if I've missed the Bleeding Obvious...

The only flaw I can see is your description of the return being paltry.

Interest rate ,not returns - "0.01% is just paltry"
Which is paltry.... £1 per £10,000

I hold about 4 years of expenses in them. The return is paltry but for all the reasons enumerated by yorkshirelad1 I will continue to hold them. I can also add that they provide some diversification and for me they are the ultimate backstop.

And you need do nothing. At maturity they just roll up the interest into the capital and reinvest for the same term.

Dod

dealtn wrote:

yorkshirelad1 wrote:
Comments welcome for any flaws in the above or if I've missed the Bleeding Obvious...

The only flaw I can see is your description of the return being paltry.

The interest rate is paltry, the return (all things considered) is respectable IMHO

Alaric wrote:

yorkshirelad1 wrote: if I've missed the Bleeding Obvious...

One thought on this. If you invested directly in Indexed Gilts, the price you would pay is likely to give a return less than the Index to which they are linked. From that restricted viewpoint, the Certificates are better value at zero real return.

I believe it's quite difficult at the moment to buy any index-linked gilts that aren't going to loose you money from the outset?

Dod101 wrote:I hold about 4 years of expenses in them. The return is paltry but for all the reasons enumerated by yorkshirelad1 I will continue to hold them. I can also add that they provide some diversification and for me they are the ultimate backstop.

And you need do nothing. At maturity they just roll up the interest into the capital and reinvest for the same term.

Dod

Indeed. One advantage I'd overlooked. They roll over into the equivalent term and type by default. Very little effort, and if one is signed up to email updates (personal choice), no mountains of paper. Quite efficient and minimum effort and minimum environmental cost (paper).

yorkshirelad1 wrote:I believe it's quite difficult at the moment to buy any index-linked gilts that aren't going to loose you money from the outset?

I don't think it's quite that bad if you measure in money terms. Rather it's that if the CPI or RPI is 2%, your return is 1%.

They certainly make some money in monetary terms. In fact even at the current paltry rates I am always pleasantly surprised at the maturity value because I never make any attempt to adjust the capital amount except on maturity.

As I said I use them as a store of last resort and as some diversification. My only other cash is what might be called working capital and is thus a variable feast.

Dod