MSE News: NS&I inflation-beating savings: stick or twist?

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  • antispam246
    antispam246 Posts: 941 Forumite
    First Post First Anniversary Combo Breaker
    Would just like clarification. My initial deposit was July so my anniversary would be July right? If I wanted to cash out would it be July or August?

    Finally, If I keep the money in, and look to withdraw in the second year, will July 2013 be penalty free also? Basically, is every anniversary penalty free for withdrawls, if done on the anniversary date? The first year isn't the only penalty free date for withdrawls?
  • lisyloo
    lisyloo Posts: 29,609 Forumite
    Name Dropper First Anniversary First Post
    If I wanted to cash out would it be July or August?

    After whatever part of July your anniversay is on.
    will July 2013 be penalty free also?

    Any date after the first 12 months is penalty free.
    It's only the first 12 months that mean you lose interest.

    You are better off getting you money after a complete month though, because I believe you only get interest in whole months.
    So you want to withdraw after 32 days when you'd get a months interest rather than 16 where you'd lose 1/2 a month. That's my understanding but I'm sure someone will correct me if I'm wrong.

    So after the first year it's penalty free, but interest only accrues in monthly chuncks.
  • oldvicar
    oldvicar Posts: 1,088 Forumite
    ILSC's are designed to be held for the full term, and as an incentive the interest rate on top of index-linking goes up each year, so that overall it meets the headline rate of e.g. RPI plus 0.5% - it will be less than 0.5% in years 1, 2 and 3, and more in year 5.

    If you are of a negative disposition, you could say that the penalty for cashing in early is that you will get a lower interest rate.
  • oftm
    oftm Posts: 34 Forumite
    The Retail Prices Index (RPI) annual inflation stands at 2.8 per cent in June 2012
  • RobStaffs
    RobStaffs Posts: 308 Forumite
    First Anniversary Combo Breaker First Post
    I am still sticking.In effect 0.5% above the index is still decent.Particulary as you can access it after a year.Wont put any more in though should they become available again.
  • dickyb
    dickyb Posts: 1 Newbie

    With the RPI falling by 0.3% to 2.8% between May & June,surely with 1 year fixed rate accounts paying 3.6% gross now is the time toget out of these certificates?


    It is only likely to get worse, isn't it?
  • sabretoothtigger
    sabretoothtigger Posts: 10,035 Forumite
    First Post Photogenic Combo Breaker First Anniversary
    edited 17 July 2012 at 7:49PM
    RLbcf.jpg
    dickyb wrote: »

    With the RPI falling by 0.3% to 2.8% between May & June,surely with 1 year fixed rate accounts paying 3.6% gross now is the time toget out of these certificates?


    It is only likely to get worse, isn't it?


    It is likely to get worse which is why you'd want to build up a stock of these issues when possible not rely on opportunities repeating in future.
    I'd say its better to cash out when RPI peaks not in any dip as rolling forward those produce greater % 'gains'
  • drlabman
    drlabman Posts: 311 Forumite
    Name Dropper First Anniversary First Post
    sabretoothtigger wrote: »
    It is likely to get worse which is why you'd want to build up a stock of these issues when possible not rely on opportunities repeating in future.
    I'd say its better to cash out when RPI peaks not in any dip as rolling forward those produce greater % 'gains'

    When you say worse, what do you mean? Inflation increasing or decreasing?
    Give a man a fish, and he will eat for a day. Teach him how to fish, and you’ll get rid of him every weekend.
  • oldvicar
    oldvicar Posts: 1,088 Forumite
    oftm wrote: »
    The Retail Prices Index (RPI) annual inflation stands at 2.8 per cent in June 2012

    Grammatically / statistically this is nonsense.

    The RP Index fell in June. [The price of the 'basket' went down]. In general those thinking of selling ILSCs soon would be better to sell now rather than next month.

    But I am sticking, for the medium and long term.
  • ManAtHome
    ManAtHome Posts: 8,512 Forumite
    First Anniversary Combo Breaker
    dickyb wrote: »
    With the RPI falling by 0.3% to 2.8% between May & June,surely with 1 year fixed rate accounts paying 3.6% gross now is the time toget out of these certificates?
    3.6% gross is 2.88% after 20% tax, 2.16% after 40%, 1.98% after 50% tax - bit of a way to go yet...

    Also, in 'ye oldene dayes' if you did cash out you could quickly build back up holdings. With issues now appearing every so often (or not at all), a short-term gain could be a substantial long-term loss (IMHO).
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