It is already pledged to inform savers who bought five-year National Savings Certificates since the 37th issue was launched a year ago, or index-linked certificates since the 6th issue came on sale last December, when their certificates mature. This will not have any impact for another four years.
But National Savings is now planning to write to savers whose certificates start maturing from 22 July onwards if they take no action within the first six to eight weeks after maturity. This will scoop up savers in the 34th issue of fixed-interest certificates. Savers who bought 5th issue index-linked certificates after 22 July 1988 will also qualify for the notification. Investors in 35th and 36th issue and 5th index-linked will be treated similarly.
The 34th issue paid 7.5 per cent tax-free if held for the full five years. On maturity the funds pass into the general extension pool which is currently paying 3.75 per cent tax-free. This is actually a competitive rate, especially for higher-rate taxpayers, when compared with interest rates on offer from building societies.
The 40th issue of Savings certificates currently on sale pays 5.75 per cent tax-free after five years. The 6th issue index-linked pays 3.25 per cent over inflation which dropped to 1.3 per cent last month - the lowest rate for 29 years.
Around two-thirds of investors withdraw their cash during the six weeks after maturity. So National Savings will only be writing to about a third of investors with maturing certificates - around 3,000 letters a month.
The first letters will be sent out in September. They will give details of the current fixed and index-linked certificates. They will also explain that once certificates go on the general extension rate, interest is only credited every three months. Investors may decide to wait until the first three-month anniversary before switching funds into a new investment or withdrawing them from National Savings.
National Savings investors are now being asked to keep it informed when they move house so that the maturity letters can find them.Reuse content