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Ending NS&I Savings Certificates - beware!!
small_print_reader
Posts: 9 Forumite
Thought I would post to warn people. I have Index Linked Savings certificates coming to an end. Do I do nothing (which means I am automatically renewed) or cash in?
Fortunately I read the small print booklet and not the glossy booklet - which strangely failed to give an illustration of the effect of the new offer on my money. Nor did it clearly set out the offer.
The interest rate on offer is 0.15% - that was set out clearly. But the index linking element no longer pays RPI. It only pays the difference between RPI when you start the certificate and the RPI at each anniversary. So instead of paying a great rate - renewing means taking a punt on what RPI will do. Sure, this deal will ensure money is inflation proof in a sort of a way and the 0.15% is tax free - but boy would RPI have to climb in each year to beat even the rubbish interest rates on offer at building societies/banks now. So I will be cashing in my certificates.....
Fortunately I read the small print booklet and not the glossy booklet - which strangely failed to give an illustration of the effect of the new offer on my money. Nor did it clearly set out the offer.
The interest rate on offer is 0.15% - that was set out clearly. But the index linking element no longer pays RPI. It only pays the difference between RPI when you start the certificate and the RPI at each anniversary. So instead of paying a great rate - renewing means taking a punt on what RPI will do. Sure, this deal will ensure money is inflation proof in a sort of a way and the 0.15% is tax free - but boy would RPI have to climb in each year to beat even the rubbish interest rates on offer at building societies/banks now. So I will be cashing in my certificates.....
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small_print_reader wrote: »The interest rate on offer is 0.15% - that was set out clearly. But the index linking element no longer pays RPI. It only pays the difference between RPI when you start the certificate and the RPI at each anniversary.
What you are talking about? If you are talking about paying the difference between the Retail Price Index like 100 on 1st year and 105 for second year then you get 5% plus 0.15%. If the third year is 108 then you get 2.85% plus 0.15%.
That has always been the case, is it not? What you described have always been like that. Unless I misunderstood it...
Cheers,
Joe0 -
You're right that the terms have changed for the most recent issues, as set out very clearly in the brochure, so that if you cash in between anniversaries you'll lose the index linking for that year plus a quarter of 0.15% (0.375%). But if you cash in at an anniversary or at the end of the term you'll lose no indexing.small_print_reader wrote: »Thought I would post to warn people. I have Index Linked Savings certificates coming to an end. Do I do nothing (which means I am automatically renewed) or cash in?
Fortunately I read the small print booklet and not the glossy booklet - which strangely failed to give an illustration of the effect of the new offer on my money. Nor did it clearly set out the offer.
The interest rate on offer is 0.15% - that was set out clearly. But the index linking element no longer pays RPI. It only pays the difference between RPI when you start the certificate and the RPI at each anniversary. So instead of paying a great rate - renewing means taking a punt on what RPI will do. Sure, this deal will ensure money is inflation proof in a sort of a way and the 0.15% is tax free - but boy would RPI have to climb in each year to beat even the rubbish interest rates on offer at building societies/banks now. So I will be cashing in my certificates.....
In return you'll get RPI plus 0.15% pa. so if RPI remained at the current level of 3.1% you'd get 3.25% each year. As it is free of tax that's equal to a little over 4% per annum for a basic rate tax payer or 5.4% for a higher rate payer - which is rather good compared to other savings rates.0 -
What's confusing you OP is that the percentages quoted on the news are the change in RPI over the year.“I could see that, if not actually disgruntled, he was far from being gruntled.” - P.G. Wodehouse0
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I agree with Joe. I think you've got this round your neck.
For example, the Retail Prices Index at the end of 2012 was 231.5. How do they pay you "RPI"?
At the end of 2011 it was 225.9, so it increased by 2.48%. That is what they would add to the 0.15% if the calculation was done for 2012."Things are never so bad they can't be made worse" - Humphrey Bogart0 -
Thanks folks - I rang the NS&I helpline to discuss my understanding of the way this new offer works and they said I was right - so I'm totally confused now. I think I had better ring them back.....0
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Your error is this. You are assuming that "RPI" refers to the annual rate of inflation - the number you see in the paper as 3.1% or whatever. But that's not RPI: RPI means the Retail Price Index. It's the annual change in the RPI that the papers call "inflation" or, if they are feeling more intelligent than usual, the "inflation rate".
So take redbuzzard's example: "Retail Prices Index at the end of 2012 was 231.5". If the RPI at the end of 2013 turns out to be 240.5, then the annual inflation rate = (240.5 - 231.5)/231.5 expressed as a percentage i.e. 3.9%.
Note how that arithmetic corresponds to "... the difference between RPI when you start the certificate and the RPI at each anniversary".Free the dunston one next time too.0 -
Thank you everyone - NS&I have reversed their previous advice (the lady I spoke to was wrong and is to be given advice so she does not do it again!) and I am SO glad I commented on this forum - cashing in the thing would have been the wrong decision!0
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You're welcome. Yes I thought you were making a monumental error
Glad you've got it sorted.“I could see that, if not actually disgruntled, he was far from being gruntled.” - P.G. Wodehouse0
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