Wednesday 7 April 2010

Buying NS&I Index Linked Savings Certificates

As I highlighted here National Savings and Investments (NS&I) today released a new issue of both 3 and 5 year Index Linked Savings Certificates. I’ve made use of this and invested around 4% of my retirement investing low charge portfolio into the 3 year 20th issue of these certificates by transferring some cash holdings. This new issue is paying index linking + 1%. This now means that I have 19.6% of my retirement portfolio invested with these tax efficient certificates.

So why did I buy more Index Linked Savings Certificates:

- One of my investing rules is to invest as tax efficiently as possible. I highlighted here how they benefit me as a 40% UK tax payer.

- I want to ensure I get a real (inflation adjusted) return on my money. NS&I Index Linked Savings Certificates allow me to achieve this unlike cash at the moment as I previously discussed. Even if the index goes negative (ie deflation) my understanding of the T&C’s is that you still get the 1% part so I’m still making a small return.

- Mervyn King and the bank of England claim that they have inflation in control and over the coming months it will return to their target of 2%. I just don’t buy this and I think it’s a classic case of “do as I do and not as I say”. After all the Bank of England does have 88.2% of their pension fund devoted to index-linked gilts and other government guaranteed index-linked securities.

As always DYOR.

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