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Index-linked Savings Certificates
| Who it might suit |
Anyone looking for an inflation beating, tax-free investment |
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| The key features |
3-year or 5-year term
Earns Index-linking (RPI) plus guaranteed extra interest
Invest from £100 - £15,000 per Issue
(There is a new Issue with each change of interest rate for this product) |
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| Examples of returns |
Assumes RPI increases by 3% each year over the term of the investment
5-year 37th Issue
4.05% pa
(= 6.75% gross for higher rate taxpayers)
(= 5.06% gross for basic rate taxpayers)
3-year 10th Issue
3.95% pa
(= 6.58% gross for higher rate taxpayers)
(= 4.94% gross for basic rate taxpayers) |
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| When IFAs might recommend Index Linked Savings Certificates |
When: Small cash legacies of £15,000 or less for minors, which may be held in trust
Why: Cost effective as there are no ongoing management charges or tax returns to complete
And: The return is tax-free in addition to the child’s existing tax-free allowance. |
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When: Higher rate taxpayers looking for a positive return on their investment.
Why: Individuals can invest £15,000 per Issue (or £30,000 if investing in both the 3-year and 5-year terms).
And: In 2004 there were 14 Issues, so a client investing in both terms could have sheltered £180,000* from the effects of tax and inflation. |
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When: School fees planning (see more on Saving for School fees)
Why: Maximise tax-free allowances
Individual invests £15,000 per Issue (for self AND in trust for spouse);
Spouse invests £15,000 per Issue (for self AND in trust for spouse);
Individual invests £15,000 per Issue in trust for Children 1 & 2**;
Spouse invests £15,000 per Issue in trust for Children 1 & 2** |
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When: As Savings Certificates mature (reach the end of their 3-year or 5-year term)
Why: When Savings Certificates mature, your client can keep the full Savings Certificate value invested for a further term at new interest rates† or reinvest into a new Savings Certificate. The amount that can be ‘rolled-over’† reinvested is without limit and does not affect the £15,000 holding limit on each new Issue. |
* 3-year Issues 4,5,6 and 5-year Issues 31,32,33 with a maximum investment limit of £10,000 per Issue, 3-year Issues 7,8,9,10 and 5-year Issues 34,35,36,37 with maximum investment limit of £15,000 per Issue.
** In addition to an individual’s own tax-free allowance
†Applies automatically unless your client instructs us to cash in or reinvest their Savings Certificates
