NS&I Underrated by this website

chris1

Reaper wrote: »

Current inflation is 5% if the RPI figure is used (is that the right one?)

Yes

The current 18th issue pays 1% above that tax free. So that means new savers will get 6% tax free.

No, savers will get 1% plus whatever inflation is on the first anniversary, and the next and so on. It doesn't matter if inflation is 5% now and 10% in 6 months, if it's say 2% on the first anniversay, that's what you'll get.

I must say that sounds pretty good considering there is a chance that we might face a period of higher inflation and lower interest rates. You may have won me over. I'll have to go away and have a think about what I believe inflation is going to do.

Do let us know what you decide.

baby_boomer

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.

Please don't let's go down the unsatisfactory BLACK or WHITE route that is the unfortunate "Have a go at Martin thread".

Life's not like that, nor is MSE. And we don't just use the site for what Martin says, if at all.

I got my partner £25K of NSI indexed linked certificates last year and she's delighted with my choice . Like the OP, this had nothing to do with what Martin did or did not highlight.

amcluesent

>No, savers will get 1% plus whatever inflation is on the first anniversary, and the next and so on. It doesn't matter if inflation is 5% now and 10% in 6 months, if it's say 2% on the first anniversay, that's what you'll get.<

Hmmm...

Reaper

chris1 wrote: »

Do let us know what you decide.

I'm not sure why my opinion matters, but after mulling it over I think I won't go for it.

I'm ready to accept the commentators view that this month's RPI is a spike. There are deflationary pressures including a dropping oil price and signs that a recession is unavoidable (although I'm optimistic it won't turn out to be a severe one).

On the other side I expect bank funding to remain fragile and for there to be a desire to attract and hold bigger cash reserves than in the past. I therefore expect interest rates to remain relatively good for savers even though the Bank of England will continue to drop rates.

Dropping inflation coupled with good rates at banks makes this type of product unattractive, however good it looks now.

That's just my opinion. Feel free to disagree!

Count_Dante

chris1 wrote: »

No, savers will get 1% plus whatever inflation is on the first anniversary, and the next and so on. It doesn't matter if inflation is 5% now and 10% in 6 months, if it's say 2% on the first anniversay, that's what you'll get.

No, that's not right. The T&Cs clearly state that the index is recalculated every month rather than every year. See sections 15 and 16 of the following:

http://www.nsandi.com/products/ilsc/tandc.jsp

Lyncroft

There's a calculator on their website which tells you how much your account is worth. I got a 3 year account on 1 May 2007 for £15000. It's currently worth £16194. It should be updated in the next day or two following the RPI release today.

North_Sea_Bubble

Yep, excellent long term investments/hedges against inflation these certificates. Especially for 40% tax payers.

IGK

As has been said here, it's important to note that it's future changes to the RPI that determine the index-linking, not the current rate of RPI change. So if the RPI falls to 2% in a year, that will be the rate used on that anniversary, regardless of what it is now.
If there's deflation i.e. prices fall and the RPI rate goes negative you don't get penalised:

11. In the event of a decrease in the Retail Prices Index:

(a) any maturity value will never be less than the preceding anniversary value, or, in the case of a Certificate with a term of one year, the purchase price, together with interest at the relevant rate for the period from the preceding anniversary date to the maturity date;
(b) any anniversary value will never be less than the preceding anniversary value or, in the case of the first anniversary, the purchase price, together with interest at the relevant rate for the year.

In the scenario of much lower inflation or deflation, I would expect deposit interest rates to be much lower anyway.

It might be worth noting, despite NS&I reducing rates on some products, it's possible that they may not be reduced on new index-linked issues. My reasoning for this is just recently yields on index-linked gilts have risen dramatically, presumably as the market realises the government is going to need to borrow large amounts of money to pay for the bank bailout. Index-linked savings certificate rates might then even go up.

BobbyBlade_2

I suspect that the reason why Martin doesn't rate these savings vehicles too highly is because the rates that they are based on are susceptible to manipulation by the Government. Does anybody believe the inflation figures that are published?
IMO best AVOID. I would rather put my money in the latest Barclays regular saver account at a guaranteed 7.75% AER for 12 months. And /or the Nat West 12 month e-saver account at 6.5%AER.
If you have trust in the government then go ahead and invest in these "magnets for morons"

IGK

North_Sea_Bubble wrote: »

Yep, excellent long term investments/hedges against inflation these certificates. Especially for 40% tax payers.

I agree with everything you say, except I wish they were available for even longer terms. A 10 or 20 year issue would really provide solid inflation-proofing.