NS&I Underrated by this website

amcluesent

>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 you download the spreadsheet supplied to work out values, you'll see how the RPI is calculated. There are tables by month and year, each with an RPI multiplier increasing from a notional 1.00 set from last month.

IGK

BobbyBlade wrote: »

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"

One of my "magnets for morons" recently matured. It was the 30th 5 year Index-linked, which matured on Oct 1st.
5 years ago I invested £10,000 in that issue, and it matured worth £12,578.50. That's a compounded rate of about 4.7% tax-free. Which is equivalent to 5.87% for a basic rate taxpayer, or 7.83% for a higher-rate taxpayer. I'd say that wasn't bad.
I reinvested it for another 5 years. :beer:

North_Sea_Bubble

IGK wrote: »

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.

On maturing you have the option to roll the certificate on for another 3 or 5 year fixed period (just do nothing!!!) using the same terms as the currently available index-linked certificates and you can still also invest in the current offer as well. I've been doing this for 15 years and am very happy with the returns.

IGK

amcluesent wrote: »

>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 you download the spreadsheet supplied to work out values, you'll see how the RPI is calculated. There are tables by month and year, each with an RPI multiplier increasing from a notional 1.00 set from last month.

I know how RPI is calculated. If the RPI is 2% higher on the first anniversary than it was on the purchase date, that is what will be used for that anniversary's index-linking. Was what I said unclear?

IGK

North_Sea_Bubble wrote: »

On maturing you have the option to roll the certificate on for another 3 or 5 year fixed period (just do nothing!!!) using the same terms as the currently available index-linked certificates and you can still also invest in the current offer as well. I've been doing this for 15 years and am very happy with the returns.

Me too but for only 10 years!
The point I'm making is that even if you do every 5-year issue and keep rolling them over, your average duration is about 2.5 years. There is a risk that the rates for new certificates in the future might be lower, or they decide to stop doing them at some point (heaven forbid!). So if there were always going to be new issues regularly at sensible rates it wouldn't matter, but you can't guarantee that.

Count_Dante

IGK wrote: »

I know how RPI is calculated. If the RPI is 2% higher on the first anniversary than it was on the purchase date, that is what will be used for that anniversary's index-linking. Was what I said unclear?

What we are saying is that the interest rate changes every month, in line with the change in RPI each month. The interest rate is not fixed for a year.

IGK

That's only relevant if you cash a certificate in early (but after one year), although if one could predict deflation, then you might be able to achieve more than the maturity value in theory...

BobbyBlade_2

IGK wrote: »

One of my "magnets for morons" recently matured. It was the 30th 5 year Index-linked, which matured on Oct 1st.
5 years ago I invested £10,000 in that issue, and it matured worth £12,578.50. That's a compounded rate of about 4.7% tax-free. Which is equivalent to 5.87% for a basic rate taxpayer, or 7.83% for a higher-rate taxpayer. I'd say that wasn't bad.
I reinvested it for another 5 years. :beer:

I agree not a bad return.

I'm not for one minute suggesting that everyone investing in these are "morons." I'm just very suspicious of the various inflation figures put out by HM Gvmnt. at the moment.
I just wish that I had the same level of confidence in our government that you have!
If I honestly believed that the figures published by the Gvmnt. are an accurate and true reflection of inflation then I would have no hesitation with regards to investing in them.

Good luck to you with your investment and I hope it works out.

Savings_Dave

Interesting discussion...I was considering one of these back at the beginning of the year and so put £5,000 away for 3 years this February 08 (Issue 15) - just as inflation started rising (and before they released a new issue)

I'm sure the interest is calculated on a daily basis using monthly RPI figures, otherwise it wouldn't keep up with inflation if its based on a single figure upon the 1st anniversary etc (what about an average RPI figure for the year?)

I do believe that the inflation figures can be massaged by the Government and they do take various products and services in and out to measure inflation...

I don't believe these are for everyone, but if you already have a good savings mix (e.g. ISAs, regular savers, bonds) then it might be worth taking one out...bearing in mind inflation won't be high forever and then these products won't be competitive as savings accounts.

pumpndump

BobbyBlade wrote: »

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"

I am glad there is someone sensible on this thread. Everyone else has overlooked that their principle is not inflation proofed. There are better ways of inflation proofing that will also inflation proof the principle. These NS&I certificates are a hunk of junk. They are only good enough to light the fire or wiping your backside with.