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<p>Index-linked Savings Certificates (ILSCs) have not been on sale since 2011. Customers
who purchased ILSCs between 2 June 1975 and 7 October 1996 (Issues 1-9), and who did
not provide instructions at maturity to withdraw their funds, subsequently had their
funds mature into ‘Index-linked Extension Terms’ (ILETs). ILETs act as a holding account
for customers until they request the return of their investment.</p><p> </p><p>The
number of ILET holders and total value of ILETs since 2012 and forecasts for the next
10 years are provided in the first attachment.. NS&I undertook a data migration
in 2012 therefore data is provided from that point forward.</p><p> </p><p> </p><p>
</p><p>Interest earned on ILETs is normally held separately to the investment and
paid out when customers claim their funds. However, in 2012 NS&I capitalised interest
into accounts. Therefore, the figures in the table do not include interest earned
since 2012 (totalling c£30 million).</p><p> </p><p>ILETs currently earn interest equal
to RPI. Starting 1 May 2019, from the day and month the original investment was made
(the ‘anniversary date’), each ILET will earn interest based on CPI. On this day,
outstanding interest will be capitalised into the account, with interest earned after
this date continuing to be held separately. NS&I does not hold an anniversary
date for the oldest investments (Issues 1 and 2). For these issues, an anniversary
date of 11 November has been set. This corresponds with the date in 2012 that NS&I
last capitalised interest into these accounts.</p><p> </p><p>NS&I has the right
to change the terms and conditions of ILETs at any time after the expiration of the
original term. Customers are being notified at least 60 days in advance of the change
taking effect, via correspondence and public notices published in the Daily Express,
Daily Mail, Daily Telegraph and The Times on 8 February 2019.</p><p> </p><p>The forecast
reduction in interest payments caused by the change in the index from RPI to CPI of
Index-linked Extension Terms is provided in the second attachment.</p><p>As NS&I
announced at Budget 2018, from 1 May 2019 holders of ILSCs who chose to renew their
investments into a new term would also receive interest based on CPI rather than RPI.
The changes to ILETs and ILSCs recognise the reduced use of RPI by successive governments
and is in line with NS&I’s need to balance the interests of its savers, the cost
to the taxpayer, and the stability of the broader financial services sector.</p><p>
</p><p>The Government issues wholesale gilts through the Debt Management Office. In
the past 10 years, the only index-linked products issued by the Debt Management Office
have been Index Linked Gilts, which are linked to RPI. The Government recognises the
flaws in the way RPI is measured and have made progress in moving away from using
it. However, given the extensive use of RPI across the public and private sectors,
further moves away from the measure are complex and potentially costly. As set out
at Budget, the government’s objective is that it will reduce the use of RPI when and
where practicable. At the present time there are no current plans to stop issuing
RPI-linked gilts.</p><p><strong> </strong></p><p> </p><p> </p><p> </p><p> </p><p>
</p><p> </p>
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