There was a reader's letter in last Saturday's Telegraph Money (Consumer Champion) about long-lost but recently-found NS&I savings certificates. I was quite surprised (although I shouldn't have been) about the level of service reported from NS&I, and felt some of the answers by NS&I still fell short of the mark. What do other Fools think (of those that understand and have an interest in/knowledge of NS&I ILSCs).
‘NS&I can’t find my 1982 bonds – they could be worth a fortune’
Telegraph Sat 23 Mar 2024
https://www.telegraph.co.uk/money/consumer-affairs/nsi-index-linked-bonds-lost-value/
http://archive.today/2024.03.22-134121/https://www.telegraph.co.uk/money/consumer-affairs/nsi-index-linked-bonds-lost-value/ (non paywalled)
My thoughts are thus:
Caveat (1): I am not a financial adviser, nor a solicitor. However, I have held ILSC since at least 1987 and possibly before.
Caveat (2): Recently “Savings certificates” came in two types: index-linked and fixed rate. Over time, they have been issued in 2-, 3-, and 5-year terms. The Telegraph article seems to suggest we are dealing with ILSCs.
- Firstly, NS&I are not at their best when it comes to ILSCs. You pretty much have to know the answer yourself before asking them. About 10 years ago, there used to be some really good NS&I staff who had been with the organisation (mostly in the Blackpool office) for years and knew everything. I suspect they’ve all probably retired now, and anyone else has been outsourced to ATOS, and trained to read from a script that doesn’t include ILSCs from 30 years ago.
- Savings Certificates have been issued since 1916 (NS&I document P156W, dated March 1984)
- ILSCs are currently not on sale for new purchases (haven’t been since 2011), but are only available to holders of existing maturing certificates
- ILSC have, over the years, been available in 2-, 3-, and 5-year terms. Early issues were 5-year only, then 2-year (from 8 Oct 1999), and 3-year versions (from 26 June 2003) appeared. ILSC (5-year) seem to have been available since 1975 (“retirement issue”), then second issue in November 1980 (see NS&I leaflet NS269).
- If the reader purchased “index-linked” certificates in 1982, I would hazard a guess that they were 5-year Issue 2 ILSCs (on sale from 17 Nov 1980 to 29 June 1985). I don’t know what the rate for that issue was as my records of ILSC interest rates don’t go back that far (it may be RPI+4% but don’t quote me), but I do know the 6th issue ILSC (Nov 1992) was paying an annualised rate of 3.25%+RPI.
- Annualised rate is my description of the system where rates differed each year, but over the 5 years, one could work out the annualised rate. Since Sept 2012, ILSC have the same rate of interest each year.
- In Oct 2001, NS&I introduced automatic rollover of matured ILSCs where a matured certificate automatically rolled over into the same type (index linked or fixed) and term (2-, 3-, or 5-year), unless the holder elected otherwise..
- Before automatic rollover (instituted in Oct 2001), when a certificate matured, and the holder took no action, the certificate usually (but not always) moved onto the “General Extension Rate” which was usually lower than the currently available issue, and usually didn’t attract indexation, and was paid differently on ILSC (paid monthly) and fixed savings (paid quarterly) certificates. Some early issues of ILSCs that matured simply got indexation and not General Extension Rate.
- I think the comment by NS&I that the matured certificates ended up in a “residual account” is wide of the mark: they would probably have stayed as they were and just attracted the General Extension Rate.
- To the best of my knowledge, there were no savings certificates issued that were perpetual (as in the article): even the first issue (“retirement issue”), on sale 1975-1980, was a 5-year term. They might have been perpetual in that once matured (before auto-rollover in Oct 2001), if the owner took no action, they stayed as they were on the General Extension Rate.
- NS&I switched from using RPI to CPI for index linking investments starting in May 2019.
I suggest that it will be extremely difficult to find out the real answer, and the records and information are very rare, and NS&I will not be able to shed any light that far back. I would hazard a guess that NS&I have no idea what they’re talking about that far back, and there’s nobody in NS&I or any other related department who will be able to give a true answer. And it would hurt anyone else’s head to work that out and go that far back!
As a postscript, according to the NS&I Annual Report 2022-2023 (https://nsandi-corporate.com/performance/annual-reports), there are £22bn of Savings Certificates in issue. They are the third most held of NS&I products, the higher two being Premium Bonds (£122bn) and Direct Saver (£31bn).