The Lemon Fool

Times, Sat 4 Dec 2021: The savers seeing the upside of inflation

Article about index-linked savings certificates

https://www.thetimes.co.uk/article/ns-amp-i-index-linked-bonds-are-suddenly-hot-property-fplxrlrc5
(paywall but free account available for browsing)

Screen shot: https://imgur.com/DQEcyRk

There's no secondary market, so not sure what the point of the article is!
(I have a couple which I roll over every time- they'll be the last to go when I am a net spender/retired)

I was wondering what is the point of the article as well. I have a six figure sum in them and it is amazing how the value, nominally at least, rolls up because I have taken money out of them every 5/6 years usually to help buy a new car and the figure is more or less replaced five years later. A good lesson on inflation!

Dod

I too let mine roll over every maturity date.
BUT
the statemnet early on in the article ''guaranteed to beat inflation'...is based on 0.01% interest rate above CPI
is
WRONG !!!

its guaranteed to beat the entirely fatuous CPI rate, that almost no one considers even close to REAL inflation

mutantpoodle wrote:I too let mine roll over every maturity date.
BUT
the statemnet early on in the article ''guaranteed to beat inflation'...is based on 0.01% interest rate above CPI
is
WRONG !!!

its guaranteed to beat the entirely fatuous CPI rate, that almost no one considers even close to REAL inflation

Yes my returns will be lower in the future but as far as I can see, the CPI index linking does not come in until you roll over an existing cert which eases one in to some extent. I am not complaining though, as it still better than I would be able to get elsewhere as far as I can see.

Dod

mutantpoodle wrote:I too let mine roll over every maturity date.
BUT
the statemnet early on in the article ''guaranteed to beat inflation'...is based on 0.01% interest rate above CPI
is
WRONG !!!

its guaranteed to beat the entirely fatuous CPI rate, that almost no one considers even close to REAL inflation

I must be that no-one then (or we have different definitions of real inflation).

I have just received an NS&I Index Linked Savings Certificate Statement - at the end of the third year of a 5 year certificate. And its still RPI based. There was a 6.01% change in RPI, which is the Index linking amount - plus the 0.01% interest capitalisation.
Currently renewals (only available for those of us to be lucky enough to own Savings Certificates) have been chopped back to CPI. I suppose we should be grateful for small mercies - currently it would be difficult (impossible?) to obtain a guaranteed safe and tax free investment paying the current CPI rate.
Long gone are the days when the government provided schemes for modest savers to at least keep slightly ahead of inflation.

One thing that is still linked to RPI and carries on giving a good 'real' return is my solar panels. That carries on until 2036 currently giving an annual return of about £2,500 per annum on the cost in 2011 of £10,500. It is tax free.

scrumpyjack wrote:One thing that is still linked to RPI and carries on giving a good 'real' return is my solar panels. That carries on until 2036 currently giving an annual return of about £2,500 per annum on the cost in 2011 of £10,500. It is tax free.

No need to rub it in! Good decision by you, but not a good policy by the govt. The rest of us are paying for your 20% return through higher bills…

Spet0789 wrote:

scrumpyjack wrote:One thing that is still linked to RPI and carries on giving a good 'real' return is my solar panels. That carries on until 2036 currently giving an annual return of about £2,500 per annum on the cost in 2011 of £10,500. It is tax free.

No need to rub it in! Good decision by you, but not a good policy by the govt. The rest of us are paying for your 20% return through higher bills…

Yes it was an utterly bonkers policy, the only result being that UK users paid huge amounts to enable the Chinese to build up their solar panel manufacturing industry.

scrumpyjack wrote:One thing that is still linked to RPI and carries on giving a good 'real' return is my solar panels. That carries on until 2036 currently giving an annual return of about £2,500 per annum on the cost in 2011 of £10,500. It is tax free.

Do you have to clean your solar panels? I presume they wouldn't work if one's house is surrounded by trees. I have to spray the moss which grows on what I think are clay tiles and debris from the trees collects on them in some places. Never a problem in my previous house which had the traditional sort (slate?).

Bouleversee wrote:

scrumpyjack wrote:One thing that is still linked to RPI and carries on giving a good 'real' return is my solar panels. That carries on until 2036 currently giving an annual return of about £2,500 per annum on the cost in 2011 of £10,500. It is tax free.

Do you have to clean your solar panels? I presume they wouldn't work if one's house is surrounded by trees. I have to spray the moss which grows on what I think are clay tiles and debris from the trees collects on them in some places. Never a problem in my previous house which had the traditional sort (slate?).

No I've never had to clean them and although moss and leaves get on the roof they never stick to the panels. i suppose that the rain cleans them. The output is still usually a little higher than the monthly estimates the installers gave me over 10 years ago. The only problem I have ever had with them was when the inverter broke down but luckily it was still under warranty and so was replaced for no charge.

Thanks, sj. It was that risk that put me off at that time. Not such a good deal now.

I had solar panels installed in 2017. My return is not as good as earlier installations but still provides me with over 8.5%.

I've just received annual statements for two of my NS&I Index-linked Savings Certificates, one being credited with 5.4% interest (CPI) and the other with
7.54% (RPI), the first due to mature on 5.2.25 and the other on 5.2.24. Makes quite a difference especially when compounding. There is no way inflation on my expenses will be only 5.4%% and it is an idiotic situation. However, even the lower rate is better than any other interest rate available so far as I am aware so these certificates will be the last to go when I need more cash. DAK whether they can still be left to children or do they have to be cashed in when I die? I presume they will form part of my estate for IHT purposes though I believe they can be cashed in to pay it. Can they still be rolled over indefinitely, albeit at the CPI rate, or has that come to an end now?

rolling over is still an option but as you say only at the ficticious CPI rate (+ nonsense%)
yes will be added to estate for IHT purposes, but I belive can be sold pre probate to settle/contribute to the bill

I believe that you are able to leave/trasfer them to spouse on death...but not as far as I know to others

they remain surprisingly an area that the government has not yet ruined for us.................but...

Do not knock N S & I Index Linked Bonds. They are still about the best deal around and even plus CPI are still very much worth it. I am hoping that the .01% added to CPI might get an uplift before long bearing in mind the way interest rates are going.

Dod

Bouleversee wrote: DAK whether they can still be left to children or do they have to be cashed in when I die? I presume they will form part of my estate for IHT purposes though I believe they can be cashed in to pay it. Can they still be rolled over indefinitely, albeit at the CPI rate, or has that come to an end now?

I have some certificates held in trust. Can these be transferred to the beneficiaries?

Unless things have changed, I believe savings certs can be left to anyone you choose in your Will. This happened to me about 6 years ago when I inherited some from an uncle. They were treated the same as any other asset in the estate.

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