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MSE News: NS&I inflation-beating savings: stick or twist?
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# 1
MSE Helen
Old 28-05-2012, 4:57 PM
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Default MSE News: NS&I inflation-beating savings: stick or twist?

"It's just over a year since NS&I launched inflation-beating savings, so many customers can withdraw penalty-free ..."

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# 2
MoneySaverLog
Old 28-05-2012, 7:27 PM
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So do I hold on to them or cash them in, the first year is now up on mine.
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# 3
redmalc
Old 28-05-2012, 7:30 PM
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If you can get a better rate cash them in,i will be cashing mine because the wife as recently been made redundant and can get 3.6% Gross with Cahoot.I think last year will be the best for a time
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# 4
jamesd
Old 28-05-2012, 8:45 PM
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You predict whether inflation plus the fixed add on will beat an alternative. If you went for protection from inflation initially it may well be a good idea to keep that protection because there is a significant chance that there will be inflation at a rate high enough to beat alternatives. It's perhaps useful to consider that 2% inflation is the Bank of England target. Then note that the NS&I investments are tax free and it becomes hard to beat them with normal savings accounts if the BoE target is achieved, even harder if it isn't.
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# 5
KTF
Old 28-05-2012, 9:10 PM
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Bit of a non-story as this site cant tell you what to do with them anyway...
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# 6
kidmugsy
Old 28-05-2012, 9:46 PM
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Cash them in and you may have lost that purchasing-power-preserving tax shelter forever.
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# 7
kar999
Old 28-05-2012, 11:32 PM
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Am I missing something?... but the NS&I interest calculator today says my certs bought in May 11 are now worth £15687 rather than the MSE article's figure of £15573 (assuming I sell next month). The article appears to use March RPI but for most people who purchased in May 11 isn't the April RPI the most appropriate anniversary rate.

Current value of your £15,687.00
certificate

This calculator was updated with the latest Retail Prices Index (RPI) figure, announced 22 May 2012

http://www.nsandi.com/savings-index-...s-certificates

EDIT: With the BoE predicting the rate of inflation to remain above the 2% target well into next year I'm sticking.
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If my Auntie had been a man she'd have been my Uncle.

Last edited by kar999; 28-05-2012 at 11:41 PM. Reason: Edit
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# 8
oldvicar
Old 28-05-2012, 11:40 PM
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Some people bought them as a gamble on the inflation rate versus savings rates elsewhere. They will be agonising as to whether to keep this 'accumulator'-style bet going and will be asking themselves: Whither inflation?

Other people bought them to safely guarantee the purchasing power of their wealth. They don't give a fig what happens to inflation as far as these are concerned, although they will pat themselves on the back when it turns out higher than BoE targets.
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# 9
oldvicar
Old 29-05-2012, 5:52 AM
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Quote:
Originally Posted by kar999 View Post
Am I missing something?...
Yes you are missing something ...

Quote:
Originally Posted by kar999 View Post
...but the NS&I interest calculator today says my certs bought in May 11 are now worth £15687 rather than the MSE article's figure of £15573 (assuming I sell next month).
The NS&I calculator uses the latest figures available and currently gives a value for selling next month (in June), thereby covering 13 months not 12 months and presuming you don't sell before the day in the month they were bought.

The MSE article aims to cover values after 12 months, i.e. the figures that NS&I would have given you a month ago. But the MSE article doesn't purport to use NS&I figures from then.

Nor does MSE claim to use the actual RPI figures directly as a method of calculation which is what NS&I use. Instead it appears that MSE have made up their very own method of calculation by firstly converting the annual change in RPI to a percentage, applying the percentage as an interest rate then adding the annual interest bonus. If they have done it right then it should result - within a few pennies - to more or less the same amount. MSE could be a few pennies wrong due to rounding errors they have introduced.

It's not surprising that people get confused about how the certificates work and the difference between RPI and the annual percentage change in RPI when, in genuine efforts to explain, MSE (and others) make up alternative methods of calculation. Amazingly, lots of people seem to believe they get paid the difference in the annual percentage rates of inflation rather than the rate of inflation itself.

Quote:
Originally Posted by kar999 View Post
The article appears to use March RPI but for most people who purchased in May 11 isn't the April RPI the most appropriate anniversary rate.
MSE is right to use March RPI figures, rather than April. NS&I use the RPI figures PUBLISHED in the previous month, which themselves relate to the month before. In other words the RPI figures relating to 2 months previously are always used now.

The MSE article could have been written six weeks ago, on 17 April when the RPI figures for March were published, rather than waiting for the first anniversaries of purchase to have already gone past. But if it had been more timely, could it still have been billed as "Latest" or "News" ??
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# 10
MiserlyMartin
Old 29-05-2012, 9:17 AM
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Quote:
Originally Posted by kidmugsy View Post
Cash them in and you may have lost that purchasing-power-preserving tax shelter forever.
Thats right. Quite clearly the Bank of England and that part of government are being run/advised by a bunch of total and utter morons (in particular Charles Bean and Mervyn King), who are continuing with desperate and doomed to fail inflation causing policies. The inflation could be even more horrendous if they were to carry out the loony idea of cutting the base rate further and printing even more, so this account can protect against that, but what I really worry about is what is going to happen to the pound when the smoke and mirror tricks stop working.

Last edited by MiserlyMartin; 29-05-2012 at 9:20 AM.
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# 11
Mr K
Old 29-05-2012, 9:27 AM
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Can't quite see the point of this article. Unless you really need the money you be bonkers to take your money out of Index Linked certificates at the moment. No brainer.
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# 12
amiehall
Old 29-05-2012, 10:55 AM
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Why anyone would withdraw from these because they found a savings rate that gives a slightly better interest rate (for now...) is beyond me! The product guarantees an above inflation tax free return for 5 years. That guarantee is worth something too. I like that you can dunk the money in and ignore it but also the penalties for early withdrawal are not high so you can get at it if you need it for something.
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# 13
Nicholas-bloody-Parsons
Old 29-05-2012, 11:30 AM
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Do not forget that the government is attempting to "inflate" the economy by printing new money. So inflation is likely to remain above target for the foreseeable future.

Also, take experts opinions with a big pinch of salt as they have been persistently wrong for four years.

Finally BoE governor Meryvn Kings pension is still 100% invested in index-linked investments..... He has not cashed in yet.. As far as I am concerned, it pays to follow what the BoE governor does rather than says.
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# 14
Pincher
Old 29-05-2012, 2:48 PM
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Bought a £1,000 Index-Linked Certificate just to see what happens.

The NS&I website seems to be designed by some communist bureaucrat who has no concept about user friendliness.
You still have to send the damned thing through the post to redeem, and God knows what happens if they lose it.
What happens if you push this button?
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# 15
castle96
Old 29-05-2012, 4:19 PM
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end of year 1 for me too. Hanging on.........
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# 16
Sceptic001
Old 29-05-2012, 4:40 PM
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Quote:
Originally Posted by Pincher View Post
Bought a £1,000 Index-Linked Certificate just to see what happens.

The NS&I website seems to be designed by some communist bureaucrat who has no concept about user friendliness.
You still have to send the damned thing through the post to redeem, and God knows what happens if they lose it.
Agreed the NS&I website is a tad clunky, but have you had a better near-instant access place to put your £1000 for the past year?

And, for the record, I have had various NS&I products over the past 50 years and have never had any admin problems with them. Not a bad record, compared to other financial institutions.
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# 17
zerog
Old 29-05-2012, 5:38 PM
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Quote:
Originally Posted by oldvicar View Post
The NS&I calculator uses the latest figures available and currently gives a value for selling next month (in June), thereby covering 13 months not 12 months and...

blah blah

...when the RPI figures for March were published, rather than waiting for the first anniversaries of purchase to have already gone past. But if it had been more timely, could it still have been billed as "Latest" or "News" ??
OK, so for someone who bought on (any day in) June 2011, the correct calculation would be to use April RPIs?

April 2012: 242.5
April 2011: 234.4
Increase is 1.034556... + 0.0025 additional interest = 1.0370563...
× 15000 = £15555.84.


And for the 15687 figure mentioned above: £15572.98 locked in in May
April 2012 RPI ÷ March 2012 RPI =
1.0070598... + 0.0035/12 additional interest =
1.00735... × 15572.98 = £15687.46.

Right or wrong?
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# 18
Consumerist
Old 29-05-2012, 6:28 PM
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Quote:
Originally Posted by KTF View Post
Bit of a non-story as this site cant tell you what to do with them anyway...
Perhaps not but, at least, it is telling you that you can now do something with them if you want to. It is, perhaps, worth commenting that MSE has done a little more than NS&I on that score.

You just can't satisfy some people. Probably the very same people who complained because banks didn't remind them of a bonus coming to an end.
Warning: In the kingdom of the blind, the one-eyed man is king.
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# 19
kar999
Old 29-05-2012, 10:04 PM
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Quote:
Originally Posted by zerog View Post
OK, so for someone who bought on (any day in) June 2011, the correct calculation would be to use April RPIs?

And for the 15687 figure mentioned above: £15572.98 locked in in May
April 2012 RPI ÷ March 2012 RPI =
1.0070598... + 0.0035/12 additional interest =
1.00735... × 15572.98 = £15687.46.

Right or wrong?
I purchased a week after the launch on 18th May so although the calculator figures I get of £15687 might represent 13 months I was waiting for the April RPI to be published on May 22 to get what I "deemed" would to be a more representive anniversary figure.... well in my mind anyway.

I dont know what calendar dates the future RPI figures are published on but I dont beleives its a fixed date of the 22nd.
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# 20
Consumerist
Old 29-05-2012, 11:42 PM
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Quote:
Originally Posted by kar999 View Post
II dont know what calendar dates the future RPI figures are published on but I dont beleives its a fixed date of the 22nd.
If you're interested, you can download the dates (pdf) :-

<Consumer Price Indices Publication dates 2012 - 2013>

The next publication date is 19th June 2012 (for May RPI)

then :-

17th July 2012
14th August 2012
18th September 2012
16th October 2012
13th November 2012
18th December 2012
15th January 2013
Warning: In the kingdom of the blind, the one-eyed man is king.
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