How do NS&I Index Linked Savings Certificates work?

[paddyhasneeds]

I expect to be flamed with "read the website" but I have and tbh I'm not really any wiser.

I have money that I need to save, not sure when I'll need it and I don't expect to need it, but I I don't want it tied up so I can't access it at all.

I got caught out by Icesave so this time I'm trying to do my "due diligence" and of course NS&I is as safe as it gets.

I understand APR's as they are self explanatory, what I don't understand is how Index Linking works and how it may, or may not be a better option than a "straight" savings account especially through the financial bad times that everyone is predicting?

[greygoose]

paddyhasneeds said:

I expect to be flamed with "read the website" but I have and tbh I'm not really any wiser.

I have money that I need to save, not sure when I'll need it and I don't expect to need it, but I I don't want it tied up so I can't access it at all.

I got caught out by Icesave so this time I'm trying to do my "due diligence" and of course NS&I is as safe as it gets.

I understand APR's as they are self explanatory, what I don't understand is how Index Linking works and how it may, or may not be a better option than a "straight" savings account especially through the financial bad times that everyone is predicting?

They pay you the rate of inflation (as measured by the Retail Price Index) each year plus a small amount of interest on top as well. The terms are over three or five years so they are probably not suitable for your needs as the money is tied up for this length of time.

It's a good safe way of saving money.

[paddyhasneeds]

My understanding is you can get your money back any time you like, but if it's within the first year you only get your investment, no interest.

Being cynical, if they are linked to inflation, don't you have the situation where the Government say "inflation's only 2.5%" whilst reality suggests it's much more?

I'm still trying to work out how you're supposed to make an educated guess whether they are a "good product" or not vs. a regular savings account?

[Shaolin]

paddyhasneeds said:

I'm still trying to work out how you're supposed to make an educated guess whether they are a "good product" or not vs. a regular savings account?

They're ok - not great. Cash ISA's are the place to start but limited significantly by the amount you can put in. They are tax free if kept for the term so better value for 40% tax payer. A good safe spread-your-risk vehicle, though overall I'd say probably less good than a regular savings account and the less attractive the less your highest tax rate.

I put a few thou in a couple of years ago from a dormant BS account I had (after I'd used up ISA allowances) to mature and be used for youngest son's Uni costs. Thought it would stop me from touching it, do a bit better than inflation and be safe.

[NoelWatson]

paddyhasneeds said:

and of course NS&I is as safe as it gets.

What happens if UK were to default?

[CrashTD]

NoelWatson said:

paddyhasneeds said:

and of course NS&I is as safe as it gets.

What happens if UK were to default?

I would like to think the world bank would make sure that didnt happen

[Fatboy]

NoelWatson said:

paddyhasneeds said:

and of course NS&I is as safe as it gets.

What happens if UK were to default?

We'd have bigger problems to worry about...