http://www.nsandi.com/products/ilsc/index.jsp

These pay 1.35% + RPI. With RPI at 4.2%, this is currently 5.55% tax free. Assuming they don't fiddle RPI numbers, RPI will probably be rising steadily over the coming years.

They're probably safer than banks accounts as well.

I agree. [After using up your cash ISA allowance] for a 20% taxpayer as a savings vehicle they're hard to beat and for a 40% taxpayer pretty much unbeatable.

I recently put 10k in one. Anyone know when the next one is coming out?

You still have some way to go to use up your allowance. Generally there are 2 issues at the same time a 3 year and 5 year issue. Each has a £15k limit, and I believe there are 2 issues in a year.

If you look at the last BOE inflation forecast they show a burst of inflation (for maybe a year) and then a sharp slowdown where inflation go's back to target. The cert's have an option to cash-in after a year (I think). Depending on how the markets are at the time you may want to switch out after a year.

There's nothing to gain and everything to lose by cashing in index-linked savings certificates. The clue's in the name. The certificates are linked to RPI and pay a margin over and above RPI - whether inflation goes back to target or not is irrelevant:

Firstly because the inflation figure you refer to is CPI - a very different fish from RPI.
Secondly because the certificate pays a margin over and above RPI
Lastly because it's a tax-free bond.

It is the combination of being inflation-proofed (because it is index linked) and tax free which makes the bond attractive. Both basic-rate tax payers and higher rate tax payers in particular would gain from such a certificate. Compared to some banks it is also a very secure home for money.

Some valid reasons why some would not want such a bond might be:

They don't want to tie-up money for three to five years.
They want a higher-risk strategy for their money.
The certificate compared to other savings options is not particularly good value.

Sorry I meant in a situation where house prices had fallen rapidly after one year.

I think they are a good option since most deposit rates will be based on the rate that targets CPI. For 20% tax need to earn 5.25% just to stay with RPI.

When is the next index-linked savings certificate issue due ?

Would you expect them to offer a lower % over RPI to stop them sucking funds away from the private sector?

You're probably aware of this but just to clear up any possible confusion you can cash them in after as little as one year:

On the current 3 year issue you get RPI + 1.1% if you cash in after one year.

Full Interest Rate Details

Indeed yes, apologies if my posting caused some confusion. Cashing-in early is possible at any time - as I recall no interest is paid if cashed-in within one year and thereafter the interest rate rises to its maximum and 3 and 5 years. Ideally, anyone buying should hold the issue as long as possible. It's also worth pointing out that you don't have to buy the full holding at once - e.g. you could drip-feed money over the life of the issue and then the bonds will also mature at differing times.

They're a fantastic deal, particularly for higher rate tax payers. I find it funny that, in this area at least, the government has to admit that RPI is the thing that really counts, not CPI (they're not dumb enough to believe anyone would buy CPI linked notes I assume).

Can I ask if once one of these has been opened with say, £5K, I have the option to add money to the bond at anytime up to a mximum of £15K? I couldn't see any mention of this in the T's and C's of the product. Still a good deal but are they as good with RPI predicted to fall to 3% over this year as growth slows.?

Yes you can but additional investments must be at least £100 [see paragraph 29 of the T&Cs] and you can only top up in this way until either you hit the investment limit of 15K or a new issue of the same term is launched. Once a new issue is launched the old issue is closed for new business and you will only be able to invest in the new issue, which may have a different rate of additional interest ( it's 1.35% over RPI in the current issues).

Is it worth it ? As always it depends. If RPI falls to 3% a higher rate taxpayer would need to find a bank account paying 7.25% to get the same return. For a basic rate taxpayer the effective return would be lower, between 5.44% and 5.58%, where the existence of range is due to the fact that the basic rate of income tax changes from 22% to 20% in April this year.

Would anyone care to speculate what will happen to the RPI over the next year or two?