NSI Indexed linked savings bonds?
Discussion
I’m patiently waiting for an issue of these bonds but do they make sense in the long term? Presumably you have to stick with it for 10 plus years. Ideally I want an investment I can forget about and safely accrue gains.
Also with socialism becoming fashionable wouldn’t it make sense to have an investment tied to inflation?
Also with socialism becoming fashionable wouldn’t it make sense to have an investment tied to inflation?
When they were issued they were amongst my favourite ever investments. Guaranteed RPI beating returns and tax free. Now CPI and no margin - still unbeatable on an after tax basis for a risk free product but only available on roll overs I think. They are extremely expensive for the Government to issue (index linked gilts are trading at massive premiums) so I doubt they will ever issue new ones, sadly.
Yes, they have not issued any new ones for many years but there is a large cohort of savers who are happy to let what they have invested roll over despite the terrible headline interest rate and the tighter controls on cashing in (loss of a year's interest/linkage). I still have a few which are linked to RPI and are tax-and-CGT-free.
The annual statements are useful to point out to my young adult children 1) how even low level inflation erodes returns and 2) how a government guaranteed index-linked tax-free return (if available, which it is not to new investors at the moment, nor for the foreseeable future given the low rates on government debt) beats other term cash deposits hands down and can form a useful part of one's investments alongside other more volatile but potentially higher return sectors:
For example, an annual statement last month for a rolled-over holding in Issue 53 (term 5 years, Interest rate = index linking (RPI) +0.01% tax-free/AER). goes as follows:
Interest capitalisation = £2.09
Index-linked return = £633.39.
So, as I pointed out to the kids, even at 1.5% interest, which Marcus offered, or did the last time I looked, the interest would be £313.50 but inflation would mean that that the real return was -£320 even if they earned too little to pay tax on savings interest.
No wonder there are asset bubbles in all sorts of weird and dodgy parallel investments in the search for a return.
The annual statements are useful to point out to my young adult children 1) how even low level inflation erodes returns and 2) how a government guaranteed index-linked tax-free return (if available, which it is not to new investors at the moment, nor for the foreseeable future given the low rates on government debt) beats other term cash deposits hands down and can form a useful part of one's investments alongside other more volatile but potentially higher return sectors:
For example, an annual statement last month for a rolled-over holding in Issue 53 (term 5 years, Interest rate = index linking (RPI) +0.01% tax-free/AER). goes as follows:
Interest capitalisation = £2.09
Index-linked return = £633.39.
So, as I pointed out to the kids, even at 1.5% interest, which Marcus offered, or did the last time I looked, the interest would be £313.50 but inflation would mean that that the real return was -£320 even if they earned too little to pay tax on savings interest.
No wonder there are asset bubbles in all sorts of weird and dodgy parallel investments in the search for a return.
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