Monday 21 January 2013

National Savings & Investments: Renewal Notification or eviction notice?

Really disappointed to receive a renewal notification for one of my National Savings Index Linked Certificates this week, which brings me to the conclusion that either the Government doesn't need to borrow anymore or is working on the basis that, for many savers, they are still the best option and are looking to exploit any savers needing money quickly.

What do I mean by this? Well, to begin with, its well documented that Index linked certificates are currently closed to new investment but for existing investors there is the option of renewing and rolling over existing certificates. 
However, the current renewal offer is now RPI +0.25% AER. 
Pretty measly even if the 0.25% does mean it beats the very "carefully" measured inflation figure.

More crucially though, if you do decide to cash in within the 3/5 year term, National Savings will now impose:
"a penalty equivalent to 90 days' interest on the amount you cash in...... and you won't earn any index linking on the whole certificate for the investment year in which you cash in, even if you only cash in part of it."

The second part of that statement seems particularly harsh raising the stakes to all or nothing.

So I can't really work out if National Savings are trying to empty the cash out or just looking to squeeze on the funds invested.
Feels like an eviction notice to me though.

Looks like the changes were made in September but only get posted out to savers once the 30 day countdown to an affecting anniversary is reached.

National Savings were originally set up as a further means for Government to borrow so I can only imagine that it is "currently" a more expensive option than the bond markets.

Given the current climate there is also a much wider responsibility for me though, and that is provide savers with a safe haven, and provide a competitive alternative to the abysmal rates offered by financial institutions. 
And let us not forget that, ultimately, it also means that savers are contributing to the UK Government's public sector borrowing requirement.

But then again it is the Bank of England that is creating this long term imbalance in markets that continues to encourage profligacy whilst allowing banks et al to run their own versions of pyramid schemes.
That being the case, is the Government also revealing to us in a not very subtle way that this abuse will continue for the foreseeable.

Seems neither subtle, clear or intelligent!

And, given recent talk of triple dip recessions and an increasing threat to the UK's credit rating, which might yet lead to higher borrowing costs on bond markets, it seems very short sighted to risk alienating savers even further via this avenue.
But, I can't think of any Government of recent times taken a view beyond the next election!

Beatings will continue until morale improves!

Article links:
http://www.nsandi.com/savings-index-linked-savings-certificates

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