National Savings & Investments have announced changes to the way their Index Linked Savings Certificates operate. These changes take effect on the 20 September 2012. The link to the NS&I Announcement is here.
The change that hurts me the most is likely to be:
"penalty and loss of index-linking for cashing in early
The penalty is equivalent to 90 days’ interest on the amount cashed in. And you’ll lose the index-linking on your whole Certificate for the investment year in which you cash in."
This is likely to hurt as should house prices resort to a sensible valuation I would likely liquidate all of my NS&I Index Linked Savings Certificates to maximise my deposit and hence minimise my mortgage rate. Although at the rate we're going I won't have to worry about that for a long time.
There may however be one small positive in the announcement:
"new online and phone service
This gives you a secure and convenient way to keep track of your money with NS&I and keep your details up to date."
It would be nice to be able to jump online to see current values without the hassle of having to run all your certificates through the online calculator one by one. Only time will tell if that's what they intend to offer.
As always DYOR.
The change that hurts me the most is likely to be:
"penalty and loss of index-linking for cashing in early
The penalty is equivalent to 90 days’ interest on the amount cashed in. And you’ll lose the index-linking on your whole Certificate for the investment year in which you cash in."
This is likely to hurt as should house prices resort to a sensible valuation I would likely liquidate all of my NS&I Index Linked Savings Certificates to maximise my deposit and hence minimise my mortgage rate. Although at the rate we're going I won't have to worry about that for a long time.
There may however be one small positive in the announcement:
"new online and phone service
This gives you a secure and convenient way to keep track of your money with NS&I and keep your details up to date."
It would be nice to be able to jump online to see current values without the hassle of having to run all your certificates through the online calculator one by one. Only time will tell if that's what they intend to offer.
As always DYOR.
It is one of the basic principles of financial repression that a government needs to remove all easy means for savers to get any after inflation return on their savings
ReplyDeleteExpect this and more QE to force you to spend your stash
Hi Anonymous
DeleteI'm not quite as "glass half empty" as yourself but I am wondering why NS&I would introduce the penalty and loss of index linking. I'm actually wondering if it is an attempt to lengthen the holding period of each Savings Certificate. It could be innocent enough with them trying to save on administration by reducing churn. Let me demonstrate.
I believe that most people will not and do not read all the T&C's associated with financial products. The finance industry partly forces this by ensuring they are written in legal speak and usually are the length of War & Peace. So Average Joe is going to be buying his Index Linked Savings Certificates not knowing of these penalties.
Now Average Joe wants to sell. Once upon a time he would have filled in a paper form and posted it off. Some time later he received his money. Under the new regime he would have still received his money but with the penalty and loss of index linking. Now let's bring the online change in. Under the new regime he now probably goes online to sell. Before accepting his sell order a pop-up appears and tells him of the penalties. Does he still sell or does he sell something else?
Cheers
RIT
I am assuming that with the on-line calculator, you just enter holder's number into it along with some other personal details. What does annoys me is an annual statements to help me keep track them. It sound like they will do this for each one. In other words, for someone who saved into them monthly, it would mean paperwork every month.
ReplyDeleteOn other hand, it is still good news regarding knowing updated value of Index Linked Savings Certificates.
Cheers
Joe
Hi Joe
DeleteThe calculator asks you to enter amount, day purchased, month purchased, year purchased and investment term in a very clunky way. If you have a lot of certificates like me then it takes some time to gather the data.
I hope they don't send a statement and have a login for each one. That wouldn't be much better.
Cheers
RIT