National Savings and Investment (NS&I) has today reintroduced its highly popular tax-free indexed-linked savings certificates to allow savers to guarantee that their money will at least beat inflation if tied up for the next five years.
NS&I has introduced new issues of its savings certificates, including index-linked Savings Certificates (also known as inflation-beating savings) and fixed-interest Savings Certificates.
The new Issues are available to savers in a 5-year term only and are tax-free. Index-linked Savings Certificates will pay index-linking, measured by the Retail Prices Index, plus a fixed rate of interest of 0.50% AER. Fixed-interest Savings Certificates will pay 2.25% AER.
Certificates pay 0.5% above inflation
The index-linked Savings Certificates promise to match inflation and to add 0.5% on top. The fact that these Certificates are tax-free make them very appealing and there will be huge demand from savers. People are allowed to invest up to £15,000 in this current issue.
Because basic rate taxpayers lose 20% of the interest they earn on money they put by, they currently need to get a return of around 5% on their savings accounts to ensure inflation doesn’t eat into their cash.
5-year fixed-rate deal
The 5-year fixed-interest Savings Certificates pay a rate of 2.25%, but as they are tax-free you’d need to achieve a rate of 2.81% as a basic-rate taxpayer and 3.75% as a higher-rate taxpayer on other standard savings products to match this rate. Our Best Rate tables for fixed savings products will give you the best current 5-year deals.
Fixing your savings for several years might appeal to you if you’re keen to maximise the interest your earn on your money – in which case you should visit our cash Isas and Best Rate savings accounts reviews.
However, fixing your savings can be risky as you won’t be able to access your cash easily in an emergency – and you could lose out if the Bank of England base rate rises during the term of your fixed-rate deal.
Beating inflation will appeal to many
Which? savings analyst Paul Davies commented: ‘The continuing high level of inflation means that people are battling to get a decent return on their savings with the base rate still at 0.5%.
‘Consequently, these are difficult times for savers – especially older people and pensioners, who may rely upon the interest they earn on savings for an income. The Inflation-Beating Certificates will prove popular with those looking for at least a minimal level of growth on their capital and they are tax-free.
‘If you’re fed up with getting poor rates on your cash, you may also want to consider investing as an alternative way to generate better returns – perhaps using a stocks and shares Isa.
Savers can invest in savings certificates at nsandi.com, via NS&I’s UK-based contact centres or by post.
Which? Money when you need it
You can follow @WhichMoney on Twitter to keep up-to-date with our Best Rates and Recommended Provider product and service reviews.
Sign up for the latest money news, best rates and recommended providers in your newsletter every Friday.
Or for money-saving tips, and news of how what’s going on in the world of finance affects you, join Melanie Dowding and James Daley for the Which? Money weekly money podcast
For daily consumer news, subscribe to the Which? news RSS feed here. And to find out how we work for you on money issues, visit our personal finance campaigns pages.