Inflation Linked Savings discussion area

stphnstevey wrote: »

Martin quotes previous returns as around 9% - which I think can be missunderstood that previous returns have an effect on future returns

Here no one knows what is going to happen so your taking a chance that you only get the 0.5% fixed return after 5yrs (or 0.25% over 1yr)

I don't think this is clear in his article

I don't think the majority of people who are buying these understand this. We don't know what the return on this NS&I product is going to be.

stphnstevey wrote: »

Martin quotes previous returns as around 9% - which I think can be missunderstood that previous returns have an effect on future returns

Here no one knows what is going to happen so your taking a chance that you only get the 0.5% fixed return after 5yrs (or 0.25% over 1yr)

I don't think this is clear in his article

I don't think the article quotes 9%. Martin does in this week's email, and it's upsetting that this misinformation is being publish again after so many complaints last time around.

Hi - I've bought NSI certificates in the past in joint names.
Can anyone tell me whether we have a £15K allowance or does it double for joint names?

mr_fishbulb wrote: »

RPI is not a percentage, it's a number made up of the price of a basket of goods.

The % figures you see on the news every month are the difference (in %) between the price paid for that basket of goods today and they price paid for the same goods 1 year ago. The % is the measure of change between prices now and 1 year ago.

So the amount you get back from NS&I after 12 months is the change in price of that basket of goods between what it costs now, at it costs in 12 months time.

Martin's summary says the following:

'It pays the yearly percentage change in RPI plus 0.5% AER, however this is the rate you'd get if you kept the money in the account for the whole five years. It's actually tiered - you get a different amount of fixed interest for each year you keep the account (see table).'

If the RPI changed from 5.2 to 5.5 after Year 1 the % increase is 5.7% so you would get 5.77% plus 0.25% , ie 6.05%, tax free. Not bad at all! But if the RPI does not change, or drops, then you will only get the basic 0.25%, which is bad.

Even a 0.1 change in RPI would give 2.17% tax free.

So it's a bit of a gamble, bearing in mind that the BOE may well start raising its rate in September, which could reduce the RPI.

Sceptic001 wrote: »

No, you have misunderstood. Read the earlier postings about the definition of "Retail Prices Index" and annual rate of inflation.

If the annual rate of inflation is 5.5% you get 5.5% (plus the fixed element). If inflation falls to 3% you get 3%. The year-on-year change is irrelevant.

Also, note that if base rates rise, inflation as measured by RPI will also rise because mortgage interest is included in RPI.

Thanks for that. I've attached the table from the NS&I website which hopefully explains it clearer:

The example shows how the returns are calculated each year. It is based on actual RPI figures from March 2005 to 2010 and a hypothetical interest rate. For year 1 the index-linking and interest are calculated on the initial investment value, for year 2 they are calculated on the year 1 anniversary value and so on. As future RPI figures are not known, past performance is not an indication of future performance.


I guess that the RPI is unlikely to ever drop and its increase is unlikely to fall below the BOE target of a 2% maximum? So you could say that you should always get 2.25% tax free, ie %2.85 before tax.
I don't know how many mortgages are directly linked to the BOE base rate, so cannot comment on its effect on the RPI.

I do wonder if the NS&I would really commit to paying well above retail deposit interest rates? Maybe they know something we don't.