Index Linked Saving Certs 5 year Questions

pjbltd

I'm currently sitting on 5 year Index Linked Certificates I bought this year in Jan when Inflation was high.

Does anyone know where I could find 5 year inflation forecasts?

I am worried that inflation is predicted to fall but the issue I got do give RPI + 1.35% which is a good rate anyway. These certs do not count deflation therefore you always at least get 1.35%.

How trust worthy are RPI stats? Can't the Gov just say whatever they like and change the basket of goods?

ps this is my 100th post!!:T

Lokolo

Well done.

Anyway I don't think theres anywhere that predicts it, but you can look at past trends to see what it might be (for instance at the moment we are going high high and now starting to head back down)

If you have excel:

http://www.statistics.gov.uk/StatBase/tsdataset.asp?vlnk=229

Download the CSV file, open it in excel, and attempt to make a graph out of all the data. (if you are THAT bothered)

ffacoffipawb

pjbltd wrote: »

I'm currently sitting on 5 year Index Linked Certificates I bought this year in Jan when Inflation was high.

Does anyone know where I could find 5 year inflation forecasts?

I am worried that inflation is predicted to fall but the issue I got do give RPI + 1.35% which is a good rate anyway. These certs do not count deflation therefore you always at least get 1.35%.

How trust worthy are RPI stats? Can't the Gov just say whatever they like and change the basket of goods?

ps this is my 100th post!!:T

I just bought Treasury 2.5% 2016 Index Linked gilts for a "dirty price" of under £250 per £100 nominal. This give a real yield, on top of inflation, of 3.6% if held until maturity in July 2016.

Unlike the National Savings product, these can fall in value in a deflationary environment, but a real tax free yield (bought in a self select ISA) of 3.6% was worth getting on 50% of my self select share ISA funds.

Just to add, the real yield on these was only 1% a month ago. They have fallen in price by over 15% since then and this has increased the real yield by over 2.5% since they only have 8 years to go to maturity.

Lansdowne

1) Five years is a long time and the real question is, how will the return over 5y compare with other sorts of interest rates over the whole period. There is no reason to imagine one will be better than the other over that period.
2) RPI is defined by National Statistics and the government (i.e.politicians) get no say on how the basket is arrived at
3) If you are tempted to cash them in, remember you make no gain until you have held them for a complete year and then you get RPI+0.95%

StevieJ

ffacoffipawb wrote: »

I just bought Treasury 2.5% 2016 Index Linked gilts for a "dirty price" of under £250 per £100 nominal. This give a real yield, on top of inflation, of 3.6% if held until maturity in July 2016.

Unlike the National Savings product, these can fall in value in a deflationary environment, but a real tax free yield (bought in a self select ISA) of 3.6% was worth getting on 50% of my self select share ISA funds.

Just to add, the real yield on these was only 1% a month ago. They have fallen in price by over 15% since then and this has increased the real yield by over 2.5% since they only have 8 years to go to maturity.

Those could be a real steal (and get better) if inflation dips for say 12 months and then rockets as I expect. Are they tax free like the NS&I? I guess the govt will be dishing out quite a few more of those soon.

ffacoffipawb

StevieJ wrote: »

Those could be a real steal (and get better) if inflation dips for say 12 months and then rockets as I expect. Are they tax free like the NS&I? I guess the govt will be dishing out quite a few more of those soon.

They are tax free in my self select ISA.

Otherwise the income is taxable but the index linked capital gain at the end is tax free.

http://www.selftrade.co.uk/quote.php?symbole=4uTR16

Income Yield 2.69
Gross Redemption Yield 6.53 so real yield is 3.84% less a small bit of accrued interest.
Maturity Date 26/07/2016