National Counties Building Society step in to fill the gap left by the removal of the National Savings & Investments (NS&I) Index Linked Savings Certificates
Earlier this week National Counties Building Society (NCBS) launched a five-year ISA which pays annual interest of 1% plus inflation as measured by the Retail Price Index (RPI) - the first savings product of its kind.
I have included the key features of the 2nd Issue Index Linked Cash ISA below, lifted directly from the NCBS website
- Tax-free fixed rate interest paid annually from account opening date until 30 September 2015, adds to your return, providing real growth in purchasing power
- Tax-free indexation interest paid on maturity increases the value of your savings in line with inflation
- # Illustrative rate using the change in the Retail Price Index (RPI) between July 2005 and July 2010 as per Office of National Statistics, July 2010. Should there be no change to the RPI over the five years, only the fixed rate interest of 1.00% pa tax-free^ will be earned. The RPI can fall as well as rise and past performance is not a guide to future performance.
- Limited issue - invest by 30 September 2010 (Product may be withdrawn at any time without prior notice)
- Minimum balance £5,100
- Transfer of existing Cash ISAs accepted until 30 September 2010
- No withdrawals prior to maturity
- Maturity date 1 October 2015
- Transfer to another ISA provider, or closure, allowed prior to maturity but no indexation interest paid
Things to note:
The RPI portion of your interest is paid at maturity, hence the lock-in. While the 1% portion of the interest is only accrued on your deposit and not on the RPI interest.
The key thing to note on this account is the lock-in. You can not make withdrawals from the account during the 5 year period although you can close the account and receive your initial deposit back along with the 1% interest accrued to date, but no inflation linked interest.
At present NCBS are paving the way for inflation beating savings so demand will be high. So while the closing date for applications is technically the 30th September, if the account is over subscribed NCBS will pull it sooner. So if you want to take advantage you will need to move quickly.
Obviously one question people will be asking is ‘who are NCBS, and will my money be safe?'
Well the problem is that given their size they are not rated by the credit rating agencies such as Fitch (see out article How safe is your bank?). So it’s not easy judging their financial strength. But what I would say is that if you have concerns then don’t invest more than £50,000 with them in order to ensure that your savings are protected under the Financial Services Compensation Scheme should they go bust (see hour article Money tip #99 – How to protect your savings from your bank going bust). But obviously you will only be in danger of breaching the £50,000 mark if you plan on transferring existing cash ISAs to them.
Full details on the NCBS ISA can be found here.
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