NS&I Underrated by this website

moneysavinmonkey

I'm surprised that Martin doesn't really recommend the NS&I products more - I've got a 3 year index linked Savings Certificate - When I took it out I got 5.5% interest TAX FREE! This equates to 6.875 [STRIKE]7.25[/STRIKE]% on a normal account which beats a lot of the ' top rates' recommended by Martin. If I was a higher rate tax payer it would be worth effectively even more!

Now that inflation has gone up the rate will increase by another 0.5% - and not drop as indicated by Martins Article!! (whilst other bank accounts are dropping their rates). The big point for me though is it is 100% safe and completely backed by the treasury.

I know Martin does mention these savings certificates in his Savings article - but really just as an afterthought at the end - he also says that the rates are "nothing to shout about" and that your money is locked away for 3 years minimum -which is not true - you can withdraw money if you want just you will loose interest.

[edited to correct mistake with interest rate]

amcluesent

Simple answer - click-through income.

moneysavinmonkey

Really!! :eek:
I though Martin's policy was to recommend the best rate/buy regardless of revenue generated to this site...... it does explain it though.

apt

NS&I index linked savings have been good over the last year. Tax-free NS&I accounts are also attractive for higher-rate taxpayers. I also agree with the OP that Martin undervalues security and solidity. But with inflation forecast to drop to 1% by Summer 2009 it's probably not the best time to go for an RPI linked account now unlike 18 months ago.

Reaper

Sorry but accusations of click through bias are rubbish. If you honestly believe that then you should leave this site because you can't trust anything that is said.

Before you rush into NS&I maybe you should read this.

StevieJ

moneysavinmonkey wrote: »

I'm surprised that Martin doesn't really recommend the NS&I products more - I've got a 3 year index linked Savings Certificate - When I took it out I got 5.5% interest TAX FREE! This equates to 7.25% on a normal account which beats a lot of the ' top rates' recommended by Martin. If I was a higher rate tax payer it would be worth effectively even more!

Now that inflation has gone up the rate will increase by another 0.5% - and not drop as indicated by Martins Article!! (whilst other bank accounts are dropping their rates). The big point for me though is it is 100% safe and completely backed by the treasury.

I know Martin does mention these savings certificates in his Savings article - but really just as an afterthought at the end - he also says that the rates are "nothing to shout about" and that your money is locked away for 3 years minimum -which is not true - you can withdraw money if you want just you will loose interest.

I sent him a note about that last year, I am surprised he is still saying that you need to lock away for at least 3 years.
Here is the note

Originally Posted by StevieJ
Martin,

I would be grateful if you could clarify the terms of the NS&I index linked savings certificates that you highlight in your weekly letter.

As it stands all the financial journalists that I have read identify these as fixed term bonds i.e. must be kept for 3 or 5 years to earn interest, whereas my understanding is thus, for example 3 year index linked:

Cashed in first year - Money back no interest.

Cashed in after 1st anniversary - RPI + 0.9 with incremental interest for each completed month up to second anniversary.

The second and third years being increased by RPI + 1.1 second year and RPI + 1.46 third year bringing the average increase for the three years to RPI + 1.15.

This means that (on my understanding of the way these work) the certificates not only have a current very attractive potential interest rate but possess the flexibility to be cashed in early if the fundamentals should change, a very powerful savings tool.

I would be grateful if you could check this out.

Regards,

Steve ( StevieJ)

Reaper

moneysavinmonkey wrote: »

5.5% interest TAX FREE! This equates to 7.25% on a normal account

How do you work that out? I thought tax on savings accounts was 20% which would make the equivilent interest only 6.6%. I'm not very familiar with NS&I though so maybe I am missing something?

apt

5.5% after basic-rate tax is equal to 80% of the taxable rate. To get back to 100% i.e. the pre-tax equivalent you need to increase 5.5% by a quarter not a fifth. That does not get you as high as 7.25% however.

moneysavinmonkey

Reaper wrote: »

Sorry but accusations of click through bias are rubbish. If you honestly believe that then you should leave this site because you can't trust anything that is said.

Before you rush into NS&I maybe you should read this.

I had seen that article thanks - indeed if you read it you will see that it does not apply to the particular NS&I saving product I are talking about.

I have also seen the inflation forecasts -although not the one that says inflation will return to 1% by Summer 2009.....
The most recent official bank of england forecast:


I been following their forecasts and they have consistently predicted inflation to slow and return to base rates over a 2 year period (funnily enough that is what their remit is!), and consistently inflation has continued to rise above expectations. So I'm forming my own opinion on what is going on!

As to 'leaving this site' because I don't believe everything that is written! What nonsense - Martin is just making recommendations and helpfully collecting together information - he is a journalist not a qualified financial advisor. It is up to the individual to do their own research and make their own decisions. I think this site is great but I'm not a sheep to believe everything I read thank you!

Hungerdunger

Reaper wrote: »

How do you work that out? I thought tax on savings accounts was 20% which would make the equivilent interest only 6.6%. I'm not very familiar with NS&I though so maybe I am missing something?

I make it 6.88% - still less than OP's figure of 7.25%

nicko33

in different places on the site it says:

savings-accounts-best-interest
"With NS&I the best option is its Index-linked Savings, again though the rates are nothing to shout about."

safe-savings#safe
"Whilst premium bonds are its most popular product, the average returns on them are quite poor and represent rubbish value for money (read Premium Bonds: Are they worth it?); its Direct ISA and Index-linked Savings are much better payers."