RIP now for index-linked savings certificates
Last week, National Savings and Investments stopped issuing their index-linked savings certificates, (tax-free savings options for fixed terms that promise an interest rate which will always be higher than inflation*). This is apparently because they were at risk of taking more money in from savers than they were paying out, and thereby exceeding a £2billion limit that the government has asked them to stick to. The underlying theory being that NS&I’s products were more attractive for savers than much else out there on the high street, and that if everyone saved with them, there’d be no one to save with the (currently less competitive) accounts offered by local banks and building societies.
NS&I is a government savings organisation, backed by the Treasury, and isn’t usually at the top of the league tables for super savings products, rather a Steady Eddy option (except for its Premium Bonds, which you either love or hate). The problem now is that rates offered by other financial institutions are so poor, that it’s found itself propelled to the top (particularly for inflation-linked certificates) whether it liked it or not. And as a government institution, NS&I theoretically has a responsibility to support the rest of the market. So by withdrawing its now market-leading products from sale, it’s forcing savers to put their money elsewhere – with providers who need inflows of money from savers in order to balance the amount of money they’re lending out (not that there’s much of that happening either).
This would be all very well if only there were some attractive options available (though if you’re getting less than 2% interest somewhere you should change, you can definitely do better).
You can check the latest best buy rates on sites such as Moneyfacts.co.uk - but also see from this chart here in the FT why it’s only this year that this issue has emerged. Click on the image to expand. And of course this would have been a very different blog post in 2008/09 as RPI measures plummetted below zero. No one was punting index-linking then, I can tell you.
* and that’s inflation as measured by RPI – you can read NS&I’s comments on inflation measures here, and also see Very Nice Advice’s guide to the difference between RPI and CPI here…
