🔔 Another blow to NS&I customers – this time it’s Index Linked Savings Certificates that will take the brunt.

Author: Anna Bowes
26th October 2018

From 1 May 2019, existing holders of Index-linked Savings Certificates who renew into a new term will receive index-linking based on the Consumer Prices Index (CPI) measure of inflation, rather than the Retail Prices Index (RPI).

National Savings & Investments

The change will be applied to all Certificates that mature on and after 1 May 2019 and where customers choose to renew into a new Certificate. Current holdings will be unchanged until they mature and customers do not need to take action now. NS&I will write to all holders of Index-linked Savings Certificates at least 30 days before their Certificates reach the end of their term. Index-linked Saving Certificates have not been on sale since 2011, but existing savers are able to renew them when they mature.

It is another blow to NS&I customers, but it’s not surprising. It’s been a long time coming as RPI is so much higher than CPI (in September 2018 RPI was 3.30% compared to CPI which was 2.40%) and it would appear that most other index-linked benefits have moved to CPI some time ago.

NS&I has made a number of negative moves recently to reduce the amount of funds they attract, as their net financing target has fallen by a considerable amount for the current tax year. The target now stands at just £6bn. This compares with £13bn for the year 2017-18, which was then revised down to £8bn in the Autumn Budget in November 2017.

The move is forecast to reduce the cost to the taxpayer by £610 million over the next five years.

But as these certificates are still tax-free accounts and effectively will guarantee to remain in line with inflation, albeit as a lower rate, they will continue to offer good value for many customers, especially tax payers who are fully utilising their personal savings allowance.

At the moment, there are only 24 fixed term savings accounts that match or beat CPI, for those who do not pay tax on their savings – and the shortest term is three years. Plus, there is a handful of interest-paying current accounts and kids accounts.

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