Index-Linked Savings Certificates

Index-linked saving certificates enable you to invest money and earn tax-free returns, whilst ensuring that your capital retains its buying power. Every year prices fluctuate, and unless there is a serious economic crisis, prices increase: this is called inflation. This means that your capital will have less buying power in the future than it does now. Index-linked saving certificates are designed to beat inflation by increasing the value of your capital in line with the Retail Price Index, and paying you fixed returns on top of this increase. Your capital is guaranteed to increase by more than the rate of inflation over the investment period.

Any returns on your capital are tax-free. This means that if after the investment period your original funds have grown by fifty percent, your capital will be returned to you at one hundred and fifty percent its original value, and you will not be required to pay any tax. The fixed returns that you are offered will usually be in the form of an interest rate. This interest rate will be lower than that you would receive from a regular savings account, because the gross interest that you are quoted for a normal account will have tax deducted. Higher rate tax payers will benefit the most from the tax benefits that index-linked saving certificates offer.

As with fixed interest certificates, the interest that your investment earns rises towards the end of the investment period. If you withdraw your funds before the end of this investment period, you may face interest rate penalties. You can currently invest in index-linked saving certificates for either three or five years. If you cash in your certificate within the first year of investment, you will not receive any returns on your money.