Inflation figures not good news for some NS&I savers.

poppy10_2

EalingSaver wrote: »

Are you sure about that? I have not been able to find anything to that affect.

I read the T&C's as stating this, and it has been confirmed by multiple sources, e.g. moneybox as stated above, and also

What happens in a deflationary environment? Iman Asante, a spokesperson for NS&I, says index linking cannot generate negative returns. "If RPI has fallen from one anniversary to the next then no index-linking is added. Instead, just the guaranteed interest will be added to the value," she explains. Additionally, because calculations are carried out for discrete years, even if the RPI falls sharply one year, this won't necessarily affect the return in other years.

Assuming an investment of £100 into NS&I's three-year Index-linked Savings Certificates, which has a guaranteed compound interest rate of 1 per cent.
First anniversary
-RPI has fallen to from 220 to 200.
-No index-linking is added.
-Interest at 0.85 per cent of purchase price is added.
-First anniversary value is £100.85.

Plus this guy emailed NS&I and got confirmation:

nicko33 wrote: »

I have had another reply from NS&I which now makes it clear that:

in the case of an ILSC returning RPI + 1.0%
if inflation were 0% or negative, you would still receive the 1.0%

Richard_Cocks

The added interest is separate to the index linking, so there should always be a return.

These products are usually also for longer term savings, so you've either had it good to date or have a few years for things to change (the CPI/RPI to narrow, if the spread is the concern).

But the biggest plus is the tax free thing for higher rate tax payers that's a huge boost!

martinman3

DavidAC wrote: »

I have an index linked certificate that reached an anniversary on 9th November and I took a note of its value then. I just used the online calculator and it is still worth the same. It should have had two months of index linking and fixed interest added. If they took index linking as zero instead of negative over those two month it should still be worth more due to the fixed interest. However it is calculated, according to the online calculator it has made nothing in two months. I have onother one that reached an anniversary on 3rd August, today more than 5 months on the online calculator valued it 0.09% higher.

It looks like the index linking and fixed interest are added together and that is the return you get. If index linking as negative it subtracts from the fixed return. If index linking and the fixed interest are negative from one anniversary to the next the return will be zero, you will not get any fixed interest. If I am right the value can go down from one month to the next. For me this is disasterous, it looks like its time to cash in the lot. I really do hope I am wrong.

As I have previously discovered the NS&I online calculator only gives an approximate value, for an accurate valuation you must ring NS&I and ask for one to be sent to you.

The calculation is complex and the calculator seems to use fixed tables of index-linking values for certificates purchased on a certain day of the month, the 1st I presume. This means that if your certificates were not purchased on that same day of the month used by the tables then the value provided could be out by up to one months index-linking (and fixed interest ?).

Lansdowne

That's weird, I just tried the online calculator and got the same result, namely an almost identical value as at today compared with the certified value in November.
I make it that the reduction due to negative RPI movement would have amounted to around 1% and the extra interest should be 2/12 of 0.75% or about 0.1%.

I think the online calculator is getting confused.

DavidAC

I have just telephoned NS&I to get a valuation which I was told was accurate. The figures are the same as I got using the online calculator. The valuation I got for one certificate that is over one year old is the same as the valuation last November. No return in two months. The valuation for another is just £1 more since last August. They are adding index linking and fixed interest together, the negative index linking is subtracting from the fixed interest.

Lansdowne

Assuming the November/August was the anniversary of purchase, that valuation is plain wrong. The value should have increased by x months' proportion of 1.1% or 0.75% or whatever the particular issue gives over the particular year.
If the Nov/Aug was not the anniversary it may indeed be correct.

DavidAC

Lansdowne wrote: »

Assuming the November/August was the anniversary of purchase, that valuation is plain wrong. The value should have increased by x months' proportion of 1.1% or 0.75% or whatever the particular issue gives over the particular year.
If the Nov/Aug was not the anniversary it may indeed be correct.

These are the anniversary dates. My point is the value has increased by x months of the fixed rate, but then reduced by the fall in RPI so the combined fixed and indexed return is zero. I asked if the valuations were accurate and was told they were. The question is can be value be less next month.

martinman3

I believe that NS&I have serious problems with their calculators !
I would hope that their call centre are not using them as well.

If you download the Spreadsheet calculator from the page here
you will see that only the 2 year page is populated, the 3 and 5 year pages are empty. If you enter values on the first page it fails to give a result.

Also the dates specified on the 2 year page are 1999, 2000 and 2001 !

poppy10_2

The index linking is only calculated once a year, on the anniversary of your purchase. Any figures in between those times are essentially meaningless.

If you bought ILSC in November 2007, in November 2008 they would have earned 3% plus fixed rate.
If you bought ILSC in August 2007, in August 2008 they would have earned 4.7% plus fixed rate.

You won't earn or lose anything until the next anniversary date, unless you cash in

martinman3

poppy10 wrote: »

You won't earn or lose anything until the next anniversary date, unless you cash in

If that is true then there would be no point asking for a current value except just after an anniversary date.