In March 2010 I wanted to gift my future self a regular income, and came up with a great way of doing it. Every month I would buy a three-year NS&I inflation-linked savings certificate of £500, in three year’s time I would have a three-year steady income of £500 a month. Ideally that would have been more, but I was saving in pension AVCs and filling ISAs at the same time.
I only managed to do that twice before NS&I ILSCs disappeared like summer rain – when they briefly reappeared I hit ’em straight between the eyes with the full £15k. The low-maintenance high-security non-taxable inflation-proofing of NS&I is too valuable to waste. These NS&I savings I consider strategic reserves against the unexpected. Because the value isn’t destroyed by inflation these savings are an in emergency break glass sort of thing to the extent that I will borrow money for short-term requirements rather than break into this, because once they’re gone there’s nothing else available that will preserve liquid cash across the years without stupendous amounts of faff. I don’t expect much of cash, I’d just like to find the same amount of value when I come back for it rather than have it melt into the ground.
Rust never sleeps, they say, but it came as a surprise to me to receive this statement, on a rolled over echo of that first £500
In only five years 20% of the value of that cash has quietly died in the night; it now takes £600 to represent the same value that £500 did in 2010. (Update – Bruce correctly pointed out I missed that ILSCs offered 1% over inflation for the first three years!) It summarises everything that’s wrong with cash – a great medium of exchange but a dreadful store of value. NS&I ILSCs fix the store of value problem, but since debasing the currency is how promises are paid for they aren’t sold any more.