Some lucky NS&I savers have earnt 11.11% - but is now the time to switch? SYLVIA MORRIS

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While soaring inflation has ravaged savers’ nest eggs in recent years, one lucky group has remained unaffected.

They are the holders of Index-Linked Savings Certificates from National Savings and Investments. 

What makes these savings accounts special is that they promise to always beat inflation —although only by 0.01 of a percentage point.

As inflation soared to 11.1 per cent at the end of 2022, they paid out as much as 11.11 per cent to the holders. 

Top returns: Index Linked Savings Certificates from National Savings and Investments promise to always beat inflation – although only by 0.01 of a percentage point

But as inflation has plummeted again to 2 per cent, these accounts pay less than half the amount that savers could receive in the top-paying fixed-term bonds.

So the question is, should savers hold on to them or ditch them?

Index-Linked Savings Certificates are available in two, three or five-year terms. They are no longer on sale, but those who have them can renew them for another term when they come to maturity.

Deciding to renew was an easy decision two years ago. Inflation stood at 9.4 per cent, while the top two-year bond paid 2.8 per cent. 

Certificates paid 9.41 per cent. A £10,000 sum in certificates maturing today will be worth £11,095 — equivalent to a healthy 5.44 per cent a year tax-free. That is the same as the average interest rate over the two-year period.

An equal amount saved in a three-year bond maturing now offers an even better return, at £12,102 — a robust 7 per cent. 

Over five years the return is lower but still 4.8 per cent tax-free, so your £10,000 would stand at £12,440 if it matured today.

From the archive

Meet the savvy band of savers earning a huge 12.34% interest with NS&I Savings Certificates they've been building up for years

But now the decision is trickier. Interest rates have soared — top two-year bonds from Close Brothers and Cynergy Bank pay 5.06 per cent.

Three-year bonds pay as much as 4.81 per cent (United Trust Bank and Cynergy Bank). All look so much better than the 2.01 per cent on offer from certificates. 

Recent rule changes have also thrown a spanner in the works. You can no longer get hold of your money during the term with certificates renewed since July last year.

But if you don’t renew, you will lose the benefit of holding this unique account — and they still have advantages. 

Should inflation rise again, those with protection will be very fortunate. The interest is also tax-free, and comes on top of your cash Isa allowance or any Premium Bond wins.

If you have these certificates, I would be tempted to hold on to them — but only if you are happy to tie your money up.

> Get one of these top flexible Isas and beat tax on your everyday savings