The Times: Index-linked Savings Certificates

[Parky]

Interesting comments. My understanding (in response to various comments above) is that (at present)

• rolling over on maturity is possible into similar issue (you can switch between 3 and 5-year but not between index-linked and fixed); issues are still currently available for maturing certificates, but not for fresh purchases. Who knows if issues will always be available for reinvesting maturing certificates
• savings certificates can be inherited (I inherited my mother's so it's not spouse only as noted elsewhere), according to terms of the Will
• it is possible to use savings certificates to pay inheritance direct (similar to the direct payment scheme (https://www.gov.uk/paying-inheritance-tax/deceaseds-bank-account) that money in deceased's bank accounts can be used to pay IHT direct to HRMC before probate unfreezes the bank acount). However, I am told (by a solicitor) that using savings certificates to pay IHT in this way can be incredibly slow, which would slow down paying IHT, and therefore slow down probate.
• savings certificates do form part of the deceased's estate for IHT purposes.
• I did look at putting ILSC into a trust, but it wasn't really worth it (IMO) as they would be taxed like any other asset in the trust: to my mind, why put something that is tax-free into a vehicle where it gets taxed.

IANAL

Useful information. A follow up question and a comment:-
Question. When ILSCs are inherited, do NS&I simply transfer the name to that of the beneficiary? What if there is more than one beneficiary? Is there a terms and conditions document somewhere confirming this?
Comment re trusts. ILSCs are held in trust as a bare trust on behalf of the named beneficiaries. The proceeds are tax-free.(as I understand it).

[yorkshirelad1]

Useful information. A follow up question and a comment:-
Question. When ILSCs are inherited, do NS&I simply transfer the name to that of the beneficiary? What if there is more than one beneficiary? Is there a terms and conditions document somewhere confirming this?
Comment re trusts. ILSCs are held in trust as a bare trust on behalf of the named beneficiaries. The proceeds are tax-free.(as I understand it).

As my Mum's (sole) exor, I instructed NS&I to transfer some of her (22) ILSCs intact to me, and some to my sister; no splitting of single certs. The ILSC were transfered intact with their existing start date and maturity date and matured with me & my sister when they would have done if they had still been held by my mother. I agreed the sums with my sister, based on current value (not purchase cost nor future value), and I topped up with some cash to her to equalise the totals as 50/50. (I also took the opportunity to cash out some small ILSCs: I didn't want to have to be dealing with rollover of e.g. maturing certs of £19.69 that my Mum had). I suppose (to be scrupulouosly fair) I should have split each ILSC 50/50 but that would have led to a lot of extra work, both at the time and in future (I spent a lot of time a few years ago amalgamating small ILSC holdings - when that was possible - to save admin and wasn't about to undo all that work) and for not very much gain. If you needed to split each ILSC, I would think how the split is done is up to the exor (probably in agreement with the beneficiaries), it's nothing to do with NS&I, they would just carry out the exor's instructions re transfers.

In terms of how to do the transfers, I wrote a letter to NS&I with clear instructions, but there are various forms that they sent me which didn't really do want I wanted easily. They seemed happy with a letter signed by the exor (me) and the two beneficiaries (me and sister). It saved a bit of admin that we both had existing NS&I accounts and ILSC holdings.

There is a form that I was sent (don't know if it's current, this was about 8 years ago) that would seem to suggest the exor can allocate a given amount of a given ILSC to a particular beneficiary (and split): see


Good clarification about trust: bare trust would seem to be do this (I was dealing with another type of trust); I seem to recall NS&I even have specific forms for holding in trust.

NS&I T&Cs re deceased holders were tricky to get hold of (believe me, I tried!). I was quoted lots of things based on "terms and conditions" but when I asked to see those T&Cs, not very much was forthcoming ....

IANAL and the above are my own interpretation and experience at the time. YMMV. I dealt mainly with ILSC but I would imagine the same is true of fixed rate savings certificates. HTH.

[Parky]

Thanks, YorkshireLad, very useful. Nowadays, with high inflation, it has become more attractive to hang on to ILSCs rather than cash them in.