National Savings & Investments (NS&I) this week announced the welcome return of Index Linked Savings Certificates. These were withdrawn in 2010 because high demand from savers meant that NS&I were in danger of exceeding their agreed share of the savings market.
The new issue (the 48th) has an investment limit of £15,000 and a term of 5 years. At maturity it will repay the capital and pay a return based on the change in the Retail Prices Index (RPI) over the term plus an additional 0.5%. The returns are paid tax free.
According to the Office for National Statistics, in the year to March 2011 the increase in the RPI was 5.3%.
On a note of caution, there are a number of factors currently influencing the increase in RPI such as a VAT rise and the increase in fuel duty in 2010. These will eventually cease to have an effect. The rise in RPI March 2011 was lower than the previous month and it is unlikely that it will continue at current levels for the 5 year term of the new certificates.
For further information in respect of Index Linked Savings Certificates or any other National Savings products do not hesitate to contact James Keane at Innes Reid on 01244 347 583