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  • FIRST POST
    • Former MSE Helen
    • By Former MSE Helen 28th May 12, 4:57 PM
    • 2,324Posts
    • 971Thanks
    Former MSE Helen
    MSE News: NS&I inflation-beating savings: stick or twist?
    • #1
    • 28th May 12, 4:57 PM
    MSE News: NS&I inflation-beating savings: stick or twist? 28th May 12 at 4:57 PM
    "It's just over a year since NS&I launched inflation-beating savings, so many customers can withdraw penalty-free ..."

Page 4
    • ManAtHome
    • By ManAtHome 17th Jul 12, 10:51 PM
    • 8,014 Posts
    • 5,147 Thanks
    ManAtHome
    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?
    Originally posted by dickyb
    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).
    • kar999
    • By kar999 17th Jul 12, 11:15 PM
    • 630 Posts
    • 243 Thanks
    kar999
    Yep... Having shoveled my full ISA allowances into stocks and shares ISA's for the last two years (mainly in income funds yielding c.5%) I'm grateful for another £15k of tax free savings.
    Last edited by kar999; 17-07-2012 at 11:22 PM. Reason: typo
    If the ball had gone in the net it would have been a goal.
    If my Auntie had been a man she'd have been my Uncle.
    • 10_66
    • By 10_66 22nd Jul 12, 7:36 PM
    • 2,475 Posts
    • 943 Thanks
    10_66
    This may sound like a daft question, but here it is anyway. If I want to find out what my ns&i IL saving certificate is worth, using their interest calculator, it was taken out as a 5 year certificate (I'm aware of the terms around early withdrawal), if I enter 5 years for the term, is that going to give me the rough estimate of what it's worth if it were to be cashed in now (not that I'm thinking of doing so, just interested).
    • MarkFromMullion
    • By MarkFromMullion 22nd Jul 12, 9:05 PM
    • 572 Posts
    • 324 Thanks
    MarkFromMullion
    It's not a daft question. The answer is yes, it gives a good estimate of the value if cashed in now.
    • 10_66
    • By 10_66 22nd Jul 12, 9:16 PM
    • 2,475 Posts
    • 943 Thanks
    10_66
    It's not a daft question. The answer is yes, it gives a good estimate of the value if cashed in now.
    Originally posted by MarkFromMullion
    Thanks for the reassurance of the validity of my question .
  • oneilly
    With inflation dropping is it now time to cash in and dump as much as you can in ISA's
    • Blackdog
    • By Blackdog 19th Sep 12, 8:21 PM
    • 406 Posts
    • 289 Thanks
    Blackdog
    With inflation dropping is it now time to cash in and dump as much as you can in ISA's
    Originally posted by oneilly
    I certainly would be making sure that you fill up your ISA's first. If you have reached your annual ISA limit (and you are a tax payer) then it may be worth holding on to the remaining index linked bonds as at least the return is tax free.
    • sabretoothtigger
    • By sabretoothtigger 19th Sep 12, 10:57 PM
    • 9,913 Posts
    • 6,555 Thanks
    sabretoothtigger
    manathome said it. You have to measure the scarcity of this resource before cashing out.

    Inflation can drop monthly quite easily, its the yearly averages that probably show a better picture of general direction. Is there a new graph
    Tokyo residential prices have gone from 4x London in 1990 to ¼ London in 2014
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    by Greenspan, Federal Reserve
    • cepheus
    • By cepheus 13th Nov 12, 2:32 PM
    • 17,277 Posts
    • 17,367 Thanks
    cepheus
    Looks like it was the right decision to hold them considering the latest inflation figures. Do you think the BOE are rather optimistic on inflation prospects?

    The Retail Prices Index measure of the rise in the cost of living rose to 3.2% in October from 2.6% in September, according to the Office for National Statistics (ONS).
    http://www.moneysavingexpert.com/news/banking/2012/11/inflation-up-by-largest-figure-in-two-and-a-half-years
    “Could I kindly request those who don't wish to participate in serious discussion to refrain from disrupting threads and engaging in personal attacks on fellow members, thank you.
    • Blackdog
    • By Blackdog 13th Nov 12, 7:09 PM
    • 406 Posts
    • 289 Thanks
    Blackdog
    There are so many impacts on inflation that BOE have no influence on so they have a real tough time predicting where it is going. Oil and gas prices are just one thing that can have a major impact on inflation. I have always said it is worth hanging on to these certificates if you have them especially as they are tax free. Inflation will go up and down but the tax situation is static.
    • redmalc
    • By redmalc 13th Nov 12, 7:32 PM
    • 1,029 Posts
    • 389 Thanks
    redmalc
    Hi I have earnt £915 interest since May 2011 on 15K,better than the best accounts on offer at the moment
    • cepheus
    • By cepheus 13th Nov 12, 7:36 PM
    • 17,277 Posts
    • 17,367 Thanks
    cepheus
    Hi I have earnt £915 interest since May 2011 on 15K,better than the best accounts on offer at the moment
    Originally posted by redmalc
    Or to put it another way, you have just exceeded inflation by a morsel! With most other accounts your savings would be worth less in real terms than when you invested it!
    “Could I kindly request those who don't wish to participate in serious discussion to refrain from disrupting threads and engaging in personal attacks on fellow members, thank you.
    • Masomnia
    • By Masomnia 13th Nov 12, 7:37 PM
    • 15,714 Posts
    • 33,665 Thanks
    Masomnia
    Hmm, what could you have got on a 1 year fix ISA last year? I guess that's the only really useful comparison.
    “I could see that, if not actually disgruntled, he was far from being gruntled.” - P.G. Wodehouse
    • bowlhead99
    • By bowlhead99 13th Nov 12, 9:08 PM
    • 3,777 Posts
    • 6,594 Thanks
    bowlhead99
    Hmm, what could you have got on a 1 year fix ISA last year? I guess that's the only really useful comparison.
    Originally posted by Masomnia
    You're right, it only makes sense to compare what you got then with what you could have got then elsewhere, instead of what you got then with what you could get now elsewhere.

    Both have 'opportunity costs' though, if you don't have enough cash to max out all your opportunities. If you put your money into an ISA and miss an NSANDI issue, which may not be available next year, you need to consider all the future years' inflation-linked returns which might been made available through re-investment, over the next few decades.

    If instead you go for an inflation link from NSANDI, and don't get to use this year's cash ISA allowance, you may miss out on the ability to invest those funds within an ISA wrapper in a market leading interest rate somewhere down the line, or indeed a great S&S ISA opportunity in some future year
    • Masomnia
    • By Masomnia 13th Nov 12, 9:16 PM
    • 15,714 Posts
    • 33,665 Thanks
    Masomnia
    You're right, it only makes sense to compare what you got then with what you could have got then elsewhere, instead of what you got then with what you could get now elsewhere.

    Both have 'opportunity costs' though, if you don't have enough cash to max out all your opportunities. If you put your money into an ISA and miss an NSANDI issue, which may not be available next year, you need to consider all the future years' inflation-linked returns which might been made available through re-investment, over the next few decades.

    If instead you go for an inflation link from NSANDI, and don't get to use this year's cash ISA allowance, you may miss out on the ability to invest those funds within an ISA wrapper in a market leading interest rate somewhere down the line, or indeed a great S&S ISA opportunity in some future year
    Originally posted by bowlhead99
    Completely agree, diversification is key.

    The fact that inflation is running ahead of NS&I certificates now is kind of immaterial because you won't know whether you'd have got a better return until a year's time when it has happened. The best thing you can do imho is put a bit in both. The NS&I ILSCs are a hedge against inflation, not a silver bullet for the best returns.
    “I could see that, if not actually disgruntled, he was far from being gruntled.” - P.G. Wodehouse
    • bowlhead99
    • By bowlhead99 14th Nov 12, 7:01 AM
    • 3,777 Posts
    • 6,594 Thanks
    bowlhead99
    Our currency devalues all the time, so you can get back more than you deposit with a bank or with the government (a positive interest rate), but if you accept zero risk, what motivation does someone have to pay you a positive real return?

    Inflation will sometimes run ahead of the prevailing interest rate and sometimes a bit behind. But long term, a truly risk free bank savings account can't be expected to deliver a real, inflation-beating return.

    A 5k bank deposit backed by FSCS is as safe as a 5k NSANDI deposit backed by UK govt, essentially as close to risk-free as possible. The bank doesn't need to give you an inflation-busting return because you aren't gambling and don't need to be compensated for the potential downside loss. There is technically some risk and there are some market factors so in practice you can get RPI+x, but the x is not going to be very big.

    So therefore you shouldn't expect to get anything higher than inflation (plus a litte bit, the 'x'), long term. Sometimes you can get a positive return after inflation if the bank is more desperate for cash, or thinks it can sell you other ancillary services or investment products and considers the temporarily-decent retail interest rate to be a marketing spend, and you can jump about and find these sometimes. But while it's satisfying to pick the highest performing product each year, unless you're psychic you won't be able to call it right and sustainably beat inflation in the long term.

    So if you can't beat inflation from savings in the long term, the next best thing is to equal inflation, which these ILSCs give you.

    The counterpoint is that if you know you're truly putting it away for the long term, you can perhaps afford to ride out peaks and troughs and should maybe be looking at S&S investments instead rather than savings. Then you should be able to beat inflation because you are taking risks.
    Last edited by bowlhead99; 14-11-2012 at 7:04 AM. Reason: typo
    • cepheus
    • By cepheus 14th Nov 12, 9:03 AM
    • 17,277 Posts
    • 17,367 Thanks
    cepheus
    Our currency devalues all the time, so you can get back more than you deposit with a bank or with the government (a positive interest rate), but if you accept zero risk, what motivation does someone have to pay you a positive real return?
    Originally posted by bowlhead99
    But NS Index Linked certificates is the ultimate 'no risk' investment because your true rate of return from any investment has to be measured relative to inflation. You take a bigger risk with standard non-inflation related savings accounts, whether these are fixed or variable! Every one of these is a small gamble with inflation and interest rates, but it adds up over time. This is the mistake people make.
    “Could I kindly request those who don't wish to participate in serious discussion to refrain from disrupting threads and engaging in personal attacks on fellow members, thank you.
    • Jonbvn
    • By Jonbvn 14th Nov 12, 10:56 AM
    • 5,168 Posts
    • 5,285 Thanks
    Jonbvn
    But NS Index Linked certificates is the ultimate 'no risk' investment because your true rate of return from any investment has to be measured relative to inflation. You take a bigger risk with standard non-inflation related savings accounts, whether these are fixed or variable! Every one of these is a small gamble with inflation and interest rates, but it adds up over time. This is the mistake people make.
    Originally posted by cepheus
    Agreed! This is why ILSC should form the backbone of any portfolio.
    In case you hadn't already worked it out - the entire global financial system is predicated on the assumption that you're an idiot
  • melpomene
    Should I Renew?
    Hi all

    I have read through but would still love some input.

    My 3 year NS&I certificate matures in early March. I have been on the RPI + 1% deal.

    They say that if I leave my money in I will receive 0.25% + RPI over a further 3 years.

    I'm a basic rate taxpayer.

    What should I do? I understood that inflation was through the roof given fuel and food price rises, but have read that it is actually falling, hence the confusion.

    Thanks guys.
    • StevieJ
    • By StevieJ 2nd Feb 13, 12:15 PM
    • 18,786 Posts
    • 31,492 Thanks
    StevieJ
    Hi all

    I have read through but would still love some input.

    My 3 year NS&I certificate matures in early March. I have been on the RPI + 1% deal.

    They say that if I leave my money in I will receive 0.25% + RPI over a further 3 years.

    I'm a basic rate taxpayer.

    What should I do? I understood that inflation was through the roof given fuel and food price rises, but have read that it is actually falling, hence the confusion.

    Thanks guys.
    Originally posted by melpomene
    With sterling weakening fast at the moment I suggest that inflation won't be falling in the near future.
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