ns&i index-linked certificates - The Lemon Fool (2024)

No more renewals with rpi now, only cpi which will be even less than the rpi added for last year (2.2%): I haven't yet checked what cpi is currently. I should be interested to know whether other Lemons are planning to renew or are looking for another home for their savings. The only advantage so far as I can see is that when you pop your clogs your executors can access the money without waiting for probate if I understand the rules correctly. The disadvantage is that it is not readily accessible if needed for care home fees.

One of mine rolled over for another 5 years on Feb. 5 while I was feeling too unwell to do anything about it but I was aware that I have 30 days from then to cancel it and get my money back without penalty. The decision would be easier if they were not subject to IHT.

Without knowing or asking how much is involved, if it were me I'd probably renew without much rhyme or reason, other than splitting investments into various pots is never really a bad thing and you've already outlined some of the benefits of keeping a pot at NS&I (in addition to your Premium Bonds). Also, from memory, Income Tax and CGT free, fwiiw.

The January 2020 CPI figures are due to be released on Wednesday 19 February 2020.

Consumer price inflation, UK: January 2020
https://www.gov.uk/government/statistics/announcements/consumer-price-inflation-uk-january-2020

I think the 12 month rate December 2019 CPI was 1.3%.

If you don't cancel within the 30 days you can always change your mind later and Cash in Early. The penalty is not massive given current CPI rates.

https://www.nsandi.com/index-linked-savings-certificates includes:

If you cash in early we will deduct a penalty from your payment, equivalent to 90 days’ interest on the amount cashed in. And you’ll lose the index-linking on your whole Certificate for that investment year.

Bear in mind that if you cash in all of your Certificate within 90 days of renewing, you will get back less than your renewal value.

scrumpyjack wrote:They could loan you the money to pay the care fees and you then pay them. The loan would then be a deduction from your estate in computing IHT.

This isn't the Taxes board nor Legal Issues but beware of section 103 Finance Act 1986 and IHT419:

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/705315/IHT419_012018_online-v2.pdf

Extract only:

Giftsto,andloansfrom,thesameperson Insomecases,specialrulesapplywherethedeceasedhasbothborrowedmoneyfromsomeoneandmadeagifttothatsameperson.ThesetypesofdebtsowedbythedeceasedaregenerallynotallowedasdeductionsforInheritanceTaxpurposes.

This situation has been discussed in more detail elsewhere at TLF but I'm not off to search for it!

In our situation our solicitors spoke to and then wrote to HMRC explaining that a decade had elapsed between gifts and the subsequent loans needed to fund care etc and that there was effectively no connection between the two and that the IHT419 had been completed on that basis.

In Bouleversee's situation I believe she has regularly made PETs to her offspring.

I've created a new Topic at Taxes, as below, if of any interest and in an attempt to have somewhere obvious to find it should anyone wish to discuss in greater detail (Bank Accounts Savings & ISAs not being somewhere I'd usually look for discussion of such a complicated subject).

Liabilities: investigating form IHT419: purpose of S103 FA 1986
https://www.lemonfool.co.uk/viewtopic.php?f=49&t=21827

I have about 7% or so of my investable assets in N S & I Index Linkers and that will remain the case. I see it as asset allocation rather than necessarily the best place for a great return. In the event, they could be called on for care home fees but currently I see them as the ultimate backstop in the unlikely event that I need cash to live off. I simply leave them to roll up and have no concern whether they pay CPI or RPI.

Dod

Bouleversee wrote:No more renewals with rpi now, only cpi which will be even less than the rpi added for last year (2.2%): I haven't yet checked what cpi is currently. I should be interested to know whether other Lemons are planning to renew or are looking for another home for their savings. The only advantage so far as I can see is that when you pop your clogs your executors can access the money without waiting for probate if I understand the rules correctly. The disadvantage is that it is not readily accessible if needed for care home fees.

One of mine rolled over for another 5 years on Feb. 5 while I was feeling too unwell to do anything about it but I was aware that I have 30 days from then to cancel it and get my money back without penalty. The decision would be easier if they were not subject to IHT.

I think you're right to review your ILSC. The returns are not as good as they used to be, and it depends on your circs, but I'm still holding mine. I feel the advantages are:

• no need for an IFA and no fees
• no need to report on any tax return (income or CGT) (but ILSCs do form part of your estate for IHT)
• ILCSs are above and beyond the £85k (or whatever it currently is) FSCS bank account compensation limit, so you can have £85k in a bank, and the rest in ILSCs and you're covered for both

Yes, it's possible to use NS&I funds to pay off IHT before probate, but I'm told NS&I can be quite slow to do this and it may delay probate. Also, it's possible for your exors to use funds in your bank accounts to pay funds to HMRC to settle IHT before probate (when your bank accounts are normally frozen except for specific purposes) using the "Direct Payment Scheme".

On thing that might be of interest, is that ILSC can be passed on to your beneficiaries intact. If you have kids that have ILSCs, they are not allowed to purchase new ILSCs at the moment, but they can inherit yours.

I did not know about the fact that beneficiaries can inherit ILSCs (to use the rather ugly abbreviation used by yorkshirelad1) so that is useful. Otherwise I am not in the least concerned about my executors after I have gone. They are bound simply to carry out the instructions in my Will. End of.

Dod

notwithstanding DOD101s post it was my undersstanding that only yourspouse could inherit the bonds

that being the case could you not seek out and find some young thing to end your days with..........if you are lucky it might not even be long!!

mutantpoodle wrote:notwithstanding DOD101s post it was my undersstanding that only yourspouse could inherit the bonds

that being the case ...

It wasn't Dod101 who first raised the possibility. It was yorkshirelad1 who correctly didn't suggest that only spouses can inherit.

He went into additional detail in this earlier thread on this board here:

NS&I 5-year index linked certificate -- maturity options?

viewtopic.php?p=192139#p192139

PinkDalek wrote:

mutantpoodle wrote:notwithstanding DOD101s post it was my undersstanding that only yourspouse could inherit the bonds

that being the case ...

It wasn't Dod101 who first raised the possibility. It was yorkshirelad1 who correctly didn't suggest that only spouses can inherit.

He went into additional detail in this earlier thread on this board here:

NS&I 5-year index linked certificate -- maturity options?

viewtopic.php?p=192139#p192139

Thank you!
I can't find the precise wording at the mo (I haven't got the time just now, but will try and have a look later) but a preliminary search gives the Key Features leaflet at:
https://www.nsandi.com/files/asset/pdf/index-linked-savings-certificates-key-features.pdf

which includes:

nsandi.com wrote:

• Inherited Certificates. If you inherit an Index-linked Savings Certificate you can transfer it into your name even if it takes you over the investment limit for that Issue. However, you won’t be able to buy any more Certificates of the same Issue.
• If a Certificate holder dies. If the holder (or last surviving holder of a joint Certificate) dies, the Certificate will become part of the holder’s estate. The Certificate will continue to earn index-linked growth and interest.

I recently dealt with my mother's estate as her sole exor, and was able to pass on her ILSCs intact to the two beneficiares named in her will.

IANAL.

My husband's will left the IHT exempt amount to the children and they could indeed have taken the ns&i certs. as part of that but they didn't want them so I had to sell them as well as some shares in order to give them the cash they preferred. I don't remember any delay in getting the cash payment for them.

If it avoids having to borrow from a bank to pay IHT before getting probate, that would be a great help. I suspect, however, that there will be rather more IHT to pay even with premium bonds added than can be scraped up in cash. With interest rates so low, I don't have much invested in cash savings now.

CPI doesn't seem to reflect the real inflation rate in the cost of all the things one has to pay for to survive.

Bouleversee wrote:My husband's will left the IHT exempt amount to the children and they could indeed have taken the ns&i certs. as part of that but they didn't want them so I had to sell them as well as some shares in order to give them the cash they preferred. I don't remember any delay in getting the cash payment for them.

If it avoids having to borrow from a bank to pay IHT before getting probate, that would be a great help. I suspect, however, that there will be rather more IHT to pay even with premium bonds added than can be scraped up in cash. With interest rates so low, I don't have much invested in cash savings now.

CPI doesn't seem to reflect the real inflation rate in the cost of all the things one has to pay for to survive.

I should perhaps clarify (this is my understanding, IANAL). Depending on the size of the estate and whether IHT is due or probate is needed, when someone dies, assets (particularly bank accounts) are frozen until probate is received. Any IHT needs to be settled before probate is granted (so it's something of a catch 22). Funds in the frozen bank accounts might be useful to pay IHT. It is possible that funds held with NS&I may be sent direct to HMRC to pay IHT (but I am told NS&I can be quite slow to do this; this is the slowness that I was referring to). There is also the "Direct Payment scheme" where the contents of (otherwise frozen before probate) bank accounts can be sent direct to HMRC to pay IHT. Equally, there may be more IHT to pay than there is cash (esp if there's a house involved in the estate), so even the frozen cash may not be enough to pay IHT. After probate, NS&I were fairly proficient at sending cash to exors when requested.

Bouleversee wrote:No more renewals with rpi now, only cpi which will be even less than the rpi added for last year (2.2%): I haven't yet checked what cpi is currently. I should be interested to know whether other Lemons are planning to renew or are looking for another home for their savings. The only advantage so far as I can see is that when you pop your clogs your executors can access the money without waiting for probate if I understand the rules correctly. The disadvantage is that it is not readily accessible if needed for care home fees.

One of mine rolled over for another 5 years on Feb. 5 while I was feeling too unwell to do anything about it but I was aware that I have 30 days from then to cancel it and get my money back without penalty. The decision would be easier if they were not subject to IHT.

Consumer price inflation figures: Feb edition just published this morning (19 Feb) for Jan indices
https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/previousReleases
last 12 month's figures
RPI (if you still have some ILSC indexed to RPI) running at 2.7%
CPI 1.8%

Market savings accounts rates (as an example)
https://www.thisismoney.co.uk/money/article-1621507/Best-savings-rates-Fixed-rate-accounts.html
competitive, IMHO, at the moment, and don't forget tax (as applicable)

Out of curiosity, I did a quick back-of-fa*g-packet check on 5-year CPI vs 5-year RPI. Figures are (annual, compound over 5 years, Jan 2015-Jan 2020):
CPI: 1.73%
RPI: 2.61%

Bouleversee wrote:So one loses 0.5% if one's certs. matured or had their anniversary in Jan. rather than Feb?

It is the relevant 12 month rate that is applicable, rather than a change between one month and the next. From yorkshirelad1's earlier link (albeit you were previously on RPI):

To calculate your index-linked growth, we multiply the value of your Certificate by the percentage increase (if any) in the CPI over the investment year. To calculate the percentage increase over your investment year, we look at the index at two points in time – two months before the start of the investment year, and two months before the end. (We use the index value from two months earlier because the index takes time to be compiled and published.)