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MSE News: NS&I inflation-beating savings: stick or twist?
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# 21
Pincher
Old 30-05-2012, 12:57 AM
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Quote:
Originally Posted by Sceptic001 View Post
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.

Surely it's a lot more work to have a human being processing the redemption than it is to send money to a verified account (registered for Premium Bond) automatically. Maybe the union objected, because hundreds of civil servants will lose their job.

I hope they don't send a cheque, when I eventually do redeem. It's a good thing I haven't got a 9 to 5 job, otherwise I would have to post the cheque to the bank.
What happens if you push this button?
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# 22
pqrdef
Old 30-05-2012, 8:39 AM
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Quote:
Originally Posted by kar999 View Post
I dont know what calendar dates the future RPI figures are published on but I dont beleives its a fixed date of the 22nd.
Makes no difference what day it comes out. It's not relevant to your holding until your monthly anniversary date in the following month.

If you bought on May 18th and you cash in before June 18th, you get the 12-month anniversary interest, based on March RPI as published in April.

From June 18th, you get an extra month, based on the April RPI published in May.
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# 23
oldvicar
Old 30-05-2012, 8:45 AM
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Quote:
Originally Posted by Pincher View Post
Surely it's a lot more work to have a human being processing the redemption than it is to send money to a verified account (registered for Premium Bond) automatically. Maybe the union objected, because hundreds of civil servants will lose their job.
Not at all. NS&I (formerly the Department for National Savings) doesn't employ hundreds of civil servants. Well just one or two hundred at head office. The procesing is done by thousands of private sector people. Mind you they have on average nearly 20 years experience of the job and used to be employed by the civil service so you are in safe hands. They do have good computers to help them of course, but by having experienced human intervention avoids nearly all the problems which can be introduced when leaving it to inexperienced self-service operators. In this case it improves quality.

Quote:
I hope they don't send a cheque, when I eventually do redeem. It's a good thing I haven't got a 9 to 5 job, otherwise I would have to post the cheque to the bank.
. Posting a cheque would be such a hardship for you? But don't worry, they can do a direct credit to your bank - just give the details on the redemption form you will post off to them.
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# 24
qtlc
Old 30-05-2012, 9:32 PM
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I'm thinking I'll take mine out. Got isa locked away at 4.25% for next 3 years so I'll chuck the 5k in bonds in this years allowance.

Surprised the article didn't mention isas?
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# 25
oneofthree
Old 31-05-2012, 12:53 PM
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Another point worth considering is that it would appear from the HMRC's documentation that the interest does not count as income for tax credits purposes, and for some that may be important.

Item from HMRC list of things not counting as income: "income from tax-free savings such as Individual Savings Accounts (ISAs), Personal Equity Plans (PEPs), index-linked and fixed-interest National Savings Certificates, Children's Bonus Bonds war pensions"
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# 26
peterfoster
Old 06-06-2012, 1:31 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?

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?
I took my 15k out on 19.05.11 and have just received written confirmation from NS&I that if I cash in now I will receive 15,572.98. If I deduct this 15,572.98 from your figure for 13 months of 15,687.46 you get an interest figure for the 13th month of 114.48 which is 7.3511% which cannot be right, shirley. I'll request another valuation from NS&I after 19.06.12 which will incorporate the 13th month and then I'll know for sure!
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# 27
Looter
Old 24-06-2012, 7:57 PM
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Quote:
Originally Posted by oldvicar View Post
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.
...I think you've hit the nail on the head here, and a lot of savers will belong to the first group with the interest rates being so low. I'd like to belong to the second group, if only I could stop using the NS&I calculator every time the RPI is announced!

When the bond matures, do we get given the opportunity to re-invest for a further term even if no issues are on general sale?
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# 28
oldvicar
Old 24-06-2012, 10:51 PM
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Quote:
Originally Posted by Looter View Post
...
When the bond matures, do we get given the opportunity to re-invest for a further term even if no issues are on general sale?
So far,yes, we can re-invest. In fact do nothing and they automatically roll-over for a new term.

At the moment there are re-investment issues not on general sale but just for certificates which are maturing. They pay RPI plus 0.25% over the term. Interest and index linking is applied every month from the start (unlike a newly purchased certificate which had nothing added until the first anniversary)
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# 29
pqrdef
Old 24-06-2012, 10:58 PM
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Quote:
Originally Posted by peterfoster View Post
If I deduct this 15,572.98 from your figure for 13 months of 15,687.46 you get an interest figure for the 13th month of 114.48 which is 7.3511% which cannot be right, shirley.
Yes that can be right, because the raw monthly RPI figures aren't seasonally adjusted. They fluctuate a lot around the underlying trend. Typically, the ONS's shopping basket actually gets cheaper around August and after Christmas.
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# 30
oldvicar
Old 24-06-2012, 10:59 PM
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The Retail Pices Index for May actually fell a tiny amount to 242.4 from 242.5 for April.

This means that if you bought a certificate 12 months ago, you will get back a few pence more by selling it today (i.e. in June) than selling it in July. Of course you will get most back by keeping it until maturity.
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# 31
kidmugsy
Old 24-06-2012, 11:37 PM
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Quote:
Originally Posted by oldvicar View Post
So far,yes, we can re-invest. In fact do nothing and they automatically roll-over for a new term.

At the moment there are re-investment issues not on general sale but just for certificates which are maturing.
I notice that the rules say that you can reinvest a particular certificate only once. The next time it counts as a new investment and can happen only if there is an issue on sale. Have I understood that correctly? Has anyone here experienced that limitation?
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# 32
pqrdef
Old 24-06-2012, 11:44 PM
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Yes, if you bought 13 months ago, in May, the 14-month value will be slightly less than the 13-month value (15685.50 says the calculator). But if you bought in June, the 12-month RPI is locked in, so the 13-month value will be the same, plus 1 month's bonus interest.
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# 33
guitarman001
Old 24-06-2012, 11:56 PM
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EDIT - got the answer to my own question.

I invested 11k in these June 2010, 3-year certificate. I assume I can roll over for another 3 years when it matures?

In any case, my total is now 12,192.00.
I regret not putting more of my money into this as I've basically lost the rest down the pan buying naff shares.

Last edited by guitarman001; 25-06-2012 at 12:01 AM.
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# 34
oldvicar
Old 25-06-2012, 8:41 AM
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Quote:
Originally Posted by pqrdef View Post
Yes, if you bought 13 months ago, in May, the 14-month value will be slightly less than the 13-month value (15685.50 says the calculator). But if you bought in June, the 12-month RPI is locked in, so the 13-month value will be the same, plus 1 month's bonus interest.
Thanks for spotting my sloppy error - I forgot the annual lock-in.

The terms of these just look better and better don't they.
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# 35
oldvicar
Old 25-06-2012, 8:59 AM
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Quote:
Originally Posted by kidmugsy View Post
I notice that the rules say that you can reinvest a particular certificate only once. The next time it counts as a new investment and can happen only if there is an issue on sale. Have I understood that correctly? Has anyone here experienced that limitation?
No. I have 15 year old certificates which have been re-invested several times.

I have always understood the rule to mean that you can switch a 'matured' certificate to the latest issue on sale at any time. For example Certificate matures this month, gets re-invested automatically in the latest RPI plus 0.25% issue, but if a better value certificate (say RPI + 1%) comes along say next spring you can opt to switch to it instead. Crucially it will count as a 're-investment' - meaning that interest is paid if re-invested for less than 12 months (unlike a brand new certificate), and that you could also subscribe new funds up to the limit.

The rule as I understand it means you could only do the mid-term switch outlined above once for it to still count as re-investment. BUT once a re-invested certificate reaches the end of its full gterm (e.g. 5 years) then it can be re-invested again ... and again ... and again. There is no promise that re-investment will always be offered though. But the continual re-investment option is the reason that, allegedly, some people have been able to put away over 1million in these by continually buying each new issue and letting it re-invest each time it matures.
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# 36
kidmugsy
Old 25-06-2012, 11:01 AM
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Quote:
Originally Posted by oldvicar View Post
No. I have 15 year old certificates which have been re-invested several times.
Yes, but what I'm worrying about is that that was permissible because there were new issues on sale at the time. Now there may not be. Thanks for your comment: I do wish they'd hire properly literate people to write their T&Cs; then I'd not be wondering, or troubling people like you.
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# 37
oldvicar
Old 25-06-2012, 11:46 AM
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Quote:
Originally Posted by kidmugsy View Post
Yes, but what I'm worrying about is that that was permissible because there were new issues on sale at the time. Now there may not be. Thanks for your comment: I do wish they'd hire properly literate people to write their T&Cs; then I'd not be wondering, or troubling people like you.
I think you are worrying about the wrong thing. It is not the express limit on re-investments you need to worry about, but the fact that there is no absolute promise that mature certificates can be re-invested AT ALL. They could decide tomorrow that there will be no more re-investment certificates, even if brand new ones are on sale. So far so good for existing customers who have been able to re-invest even when new ones are not on sale. But politics could turn that on its head.

If the rules and circumstances that currently exist (no new customers, but re-investment possible) were to continue it would allow existing holdings to continue to be re-invested forever. There is no 'just one roll-over' rule. I think you are misreading the terms.

I imagine that the T&Cs have been written by exceptionally literate people. The trouble is that the rules are complex and although they have done a sterling job on expressing them simply, they have not sacrificed precision or left things vague or unsaid which many other savings products do sadly. But it still needs highly literate people to be able to read them, it seems. [BTW that's meant to be funny not insulting ! ]
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# 38
kidmugsy
Old 25-06-2012, 5:32 PM
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Originally Posted by oldvicar View Post
There is no 'just one roll-over' rule. I think you are misreading the terms.]
Paragraph 50 is ill-written, in that it deals first with certificates cashed in before the maturity date, and then with certificates that have matured. A better writer would have written those as separate paragraphs. Be that as it may, the second part says:
"Matured funds can only be reinvested once. Any subsequent reinvestment [are you sure you think this chappie is literate, oldvicar?] of those matured funds will be treated as a new investment and therefore will only be possible if there are any issues available at the time. Such subsequent reinvestments are subject to the holding limit (see paragraph 41)."

I think that bears my interpretation: if you've already reinvested once and the next maturity occurs when there is no issue available at the time, then tough luck: take your money and slink off.

I take your point that allowing reinvestment at all is implied in "Matured funds can only be reinvested once" rather than explicitly stated. I suspect that that is just bad writing under pressure to use 'plain English', rather then devious evasion, but my suspicion may be wrong.
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# 39
oldvicar
Old 26-06-2012, 3:29 AM
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Kidmugsy, I think I will take back my suggestion that they have done a good job in expressing the T&Cs clearly, upon re-reading they look rather as if they have been written by a lawyer, and then sat upon by committee .

But they are still comprehensive and accurate.

Your problem is that (the second part of) paragraph 50 in a section headed "cashing in" refers only to requesting repayment and simultaneously using the proceeds to buy something called a "re-investment certificate" - in an issue which is also on general sale to new customers. This can only be done once (until the re-investment certificate itself matures), and can be done at any time after maturity of the original.

The default (and I think more usual) case is where a certificate matures and you do nothing other than let it roll over for another term of the same length and type (index linked or fixed interest). This is dealt with at paragraph 72 in a section headed "Retention after the fixed rate term". Note that with 'retention' you keep the original certificate, not get a new 're-investment certificate'.

Paragraph 73 then goes on to deal with reinvesting for a different term or type of certificate around the time of maturity. In addition to paragraph 50, which currently (but new T&Cs could be issued) confers a definite entitlement to re-invest a mature certificate at any time when certificates are on general sale, paragraph 73 allows for the current situation where at NS&I's discretion maturing certificates can be re-invested (for a re-investment certificate) in a different term/type.

Both paragraphs 72 and 73 expressly allow for retention/re-investment time and time again upon maturity of each full term, not just once, for as long as NS&I offer rollover (para 72) or re-investment (para 73) terms.

What paragraph 50 cunningly excludes is re-investing in a certificate which goes on general sale in future after you have already re-invested it for a different type or duration (under para 73 terms), without it counting as part of the maximum investment allowance.

At present, at NS&I's discretion, holders of a maturing 2-year certificate (yes they once existed) can keep them for another 2 year term (paragraph 72) or re-invest it into 3 or 5 year certificates (paragraph 73). Holders of 3 year (or 5 year) certificates may hold for a further term of the same length (para 72) or re-invest into the alternative 5 year (or 3 year) terms. But a 2-year re-investment certificate is not offered as an option for maturing 3 or 5 year certificates. Last year, when only 5-year certificates were on general sale, holders of maturing 5 year certificates were also offered the chance to re-invest in a 3-year certificate not available to new customers.

It might help if I quote the relevant terms:

Quote:
Definitions
3. In these terms and conditions:
...



(k) “Reinvestment Certificate” means an Index-linked Certificate where:
  • (i) the Certificate is purchased from the proceeds of cashed in National Savings Certificates or Ulster Savings Certificates of any Issue (including non Index-linked Issues) and is to be held in the name of the person who held the cashed in Savings Certificates;
  • (ii) the encashment and purchase are made simultaneously by means of a completed reinvestment application sent to NS&I or, in the case of Ulster Savings Certificates, by means of a completed reinvestment application sent to the Ulster Savings Branch, Bangor; and
  • (iii) the Savings Certificates cashed in were not cashed in before their maturity date;
...

Cashing in
48. ....

50. Certificates cashed in before the maturity date can be reinvested in any Issue of National Savings Certificates (Fixed Interest or Index-linked) then on sale (subject to the relevant terms and conditions). The date of encashment and of reinvestment will be deemed to be the date of purchase on the new certificate of investment. Matured funds can only be reinvested once. Any subsequent reinvestment of those matured funds will be treated as a new investment and therefore will only be possible if there are any Issues available at the time. Such subsequent reinvestments are subject to the holding limit (see paragraph 41). We will normally carry out the reinvestment within five days of receiving the instructions to cash in, however this is not guaranteed

...

Retention after the fixed rate term

72. After the original term (or any further term for which index-linking and/or interest is earned under this paragraph), a Certificate may be eligible to earn index-linking and/or interest for a further term of the same length. The Treasury will decide whether this will apply and, if so, on what terms as to index-linking and/or interest. If such index-linking and/or interest does apply, it will be applied automatically and will be guaranteed for the whole of the further term, but the holder will remain free to cash in the Certificate at any time (including for reinvestment into another Issue, if available, or another NS&I product).

73. After the original term (or any further term for which index-linking and/or interest is earned under this paragraph), the holder may be eligible to reinvest into another Savings Certificate of a different term and/or type. The Treasury will decide whether this will apply and, if so, on what terms as to index-linking and/or interest. If such index-linking and/or interest does apply, all holders wishing to reinvest will be required to provide instructions to the Director as to the term and type of Savings Certificate.

74. We will write to the holder, at the last recorded address for the holding, shortly before the end of each term to tell them of the Treasury’s decision.

Last edited by oldvicar; 26-06-2012 at 4:24 AM.
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# 40
kidmugsy
Old 26-06-2012, 11:00 AM
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Many thanks: your reply will doubtless keep me from fretting until I forget that you made it and raise the topic again.
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