This is bitterly disappointing as NS&I Index-Linked Certificates have proved a very popular and worthwhile way to save.
What about existing Certificates?
Existing savers in these products are unaffected. The certificates will run until maturity at which time the proceeds can be rolled over into the same issue (i.e. the same rate) or one of the other certificate issues.
Why have they been withdrawn?
The announcement has been prompted by a Government target that pushes NS&I to balance the monies coming in from customers with that leaving, so as not to increase government borrowing.
With net sales of £1.6 billion over the last year (to 31 March) it seems National Savings have been too popular for their own good. However, this is far lower than the £12.5 billion of net sales in 2008/09 when the Government was only too keen to borrow (and savers were flocking to National Savings for security during the banking crisis).
What alternatives are there?
The withdrawal is a major blow to savers as there aren’t any comparable alternatives to Index-Linked Certificates. Cash Individual Savings Accounts (ISAs) are tax-free, so fixed rate cash ISAs are similar to Fixed Interest Certificates, but there are currently no inflation-linked savings accounts.
You could consider index-linked gilts, but these are quite different to savings certificates and potentially risky (see here for details) so won’t be a suitable alternative for most savers.
We may see a bank or building society try to offer a comparable inflation-linked product to fill the void, for example, Leeds Building Society offered an inflation-linked cash ISA a couple of years ago. But as the banks aren’t under much pressure to raise money (because they’re not lending that much) this may be wishful thinking.
So for the time being I think you’ll just have to shop around for the best variable or fixed rate savings account you can find, using your cash ISA allowance if available.