Index Linked Certificates

Index linked certificates were introduced during the period of high inflation in the seventies. The rate of inflation was then much higher than the rate of interest you could normally earn.

So savings declined in value. In 2015 the Government introduced index-linked certificates for pensioners where the interest rate was guaranteed to match the decline in value caused by inflation.

However, the rate of inflation fell and was soon below interest rates again. So the attraction of index-linked certificates declined. However, the Government made them more attractive by offering bonuses. The current issue, the 8th, offers a bonus of more than 8% on top of inflation over five years.

The income from index-linked certificates, like that from ordinary savings certificates, is free of all income tax and capital gains tax.

And there are similar penalties for cashing them in early.

If you worry that inflation will rise again within five years, these certificates may be attractive to you, especially if you pay tax at the higher rate or lose some age allowance because of your income.

You buy these index-linked certificates at a post office and you can obtain a download about them there.

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