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NS&I index linked... keep or return ?
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deaglecat
Posts: 92 Forumite
Hi,
I have some NS&I index linked (+1%) opened in the last 3 months. If I return them then I understand that I will get no interest - but not any losses.
If I keep them then I am relying on positive RPI over the next 9 months.
So, I think my choice is to accept a 3m loss of interest now or to risk a low return over the next 12 months as RPI is prediced to fall. Tricky.
I guess that if VAT is cut tomorrow (as predicted) then we will see a drop in RPI from that !
Anyone in a similar boat ?
I have some NS&I index linked (+1%) opened in the last 3 months. If I return them then I understand that I will get no interest - but not any losses.
If I keep them then I am relying on positive RPI over the next 9 months.
So, I think my choice is to accept a 3m loss of interest now or to risk a low return over the next 12 months as RPI is prediced to fall. Tricky.
I guess that if VAT is cut tomorrow (as predicted) then we will see a drop in RPI from that !
Anyone in a similar boat ?
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Comments
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I'd probably take a risk and hold on until the end of the first year - on the basis that savings rates will fall anyway and these are tax free and pay a premium above the index.
Spot on with the VAT point though - although zero rated products and 5% rated things (e.g. gas, leccy) won't be affected, so we won't see a 2.5% drop as a result.0 -
Thanks for the reply.
I will wait till the announcement tomorrow but if VAT is cut and the implication for RPI is that it will fall then I am sorely tempted to throw in my hand on these ones.....My NR e-saver is still doing a good rate of interest.
BTW - Any VAT cut would need to be immediate cos' it will kill off spending whilst it is still pending. Wonder what the implication would be for someone who had agreed to buy a big ticket item (e.g. Car) but not yet paid for it.0 -
I am in a similar position to you. I am going to keep them. The interest rate will never be lower than the interest rate (0.85% for the first year on 3 year bonds) regardless of RPI, and you are earning decent interest while inflation remains high. Chuck them after a year if need be.0
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opinions4u wrote: »Spot on with the VAT point though - although zero rated products and 5% rated things (e.g. gas, leccy) won't be affected, so we won't see a 2.5% drop as a result.
it wouldn't be a 2.5% drop in RPI even if everything was 17.5% VAT, as it would be a cut from 117.5 to 115 = 2.1%. At a guess, given that, plus opinions4u factors above, and the fact not all of it would be passed on, I'd expect RPI to be 0.5-1% lower than it would have been, making it even more likely RPI will turn negative0 -
There are too many scenarioes which could see us go into deflation or see inflation rise next year. Its impossible to say what is going to happen.
However, its too early to think about calling it a day. Get at least the first 12 months out the way and keep under review. If you are a higher rate taxpayer and need to utilise all your tax free allowances then keep it as in the long term you will gain far more.
Remember these are 3 or 5 year products and a short term period needs to considered with the long term. Remember, interest rates are still likely to fall further.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
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I think the chance of inflation being higher in a years time than now is close to zero - now 2010 onwards is another matter
I certainly think it wont be higher than now but its possible that it will drop to the low point next year and then start to rise again slowly after that. Whatever it does though, next year is likely to be a poor one for savers and inflation linked products. After that though could be a different story. Hence why you remember its a 3 or 5 year product and the +1 current NS&I rate is attractive for the long term (potentially
). The OP making a decision now though is way too early. I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
in real terms, next year could actually be quite a good year for savers... nominal rates might only be 2-3%, but that could be a real rate of 3-4% (on average real rates average about 2% - get get higher than the average now is big bonus - its normally below average in the downturns)0
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Thanks for the replies.... some good points raised about the long term nature of these investments.
The truth is that we are on a real rollercoaster... where this one will end up is unknown (inflation, deflation, or even a slim chance of an "iceland scenario").
A few months ago it seemed like inflation was the enemy - I am not sure that it still isn't in the longer term !0 -
Will the VAT cut reduce CPI more than RPI? If CPI goes down the base rate will probably be cut even more.0
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