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

Lansdowne

Right I have had another look at the terms and conditions and I think I have resolved the question.
Paragraph 11 is quoted above and says
11. In the event of a decrease in the Retail Prices Index:
(a) any maturity value will never be less than ...
(b) any anniversary value will never be less than ...
Paragraph 12 says
12. The amount due when a Certificate is cashed in after a maturity date will never be less than the maturity value.
There is no paragraph to say
12½. The amount due when a Certificate is cashed in on a whim at some random date, after an anniversary but before maturity, will never be less than the recent anniversary value.

Looks as if there is a virtual Para 12½ in operation anyway. But this time there is no '...together with interest at the relevant rate' which is found in Para 11.

The effect in a time of declining retail prices is that the value will be static until the anniversary, then increase by the annual uplift.

Lansdowne

martinman3 wrote: »

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 !

I also found the spreadsheet mostly empty. I'm sure it's an IT bug on their new one published after yesterday's RPI release.

The two year table should go back that far so as to cater for 2-year certs purchased any time in the past and retained for a further term.

poppy10_2

martinman3 wrote: »

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

Exactly .

EalingSaver

OK, so lets start with some basics. Lets say I have held a cert for at least one year plus a number of months. The aniversary value part is fine. But what about the partial year. Do you get an RPI value based on the month 1 at rate 1, month 2 at rate 2 etc.? Or do you get x months at the rate that is appicable in the month you cash in?

I'm now beginning to feel it is thelatter, in which case since I predicted that RPI would collapse and I would have to cash in at some point, I'm now kicking myself as the cash in value of my certs will have actually been dropping over the last few months as the RPI rate dropped (as opposed to what I was thinking which is that they were accuring less each month). Anybody confirm?

Back to the -ve RPI part. I think we conclude that either the Ts & Cs are unclear or that the NS&I man on the telly got it wrong. In theory it seems to me that a -ve RPI up to the level of the fixed interest rate could be applied to give a zero increase in from prevoius aniversary date.

Lansdowne

Right, the first thing to get clear is the RPI is an Index. Retail Prices Index. Just like The FTSE 100 Index is at this moment 4128.37 - reflecting the level of share prices this morning. The latest Retail Prices Index is 212.9 reflecting prices in the shops in December. Last month it was 216.0 and a year ago, based on prices in December '07 it was 210.9.
So RPI inflation is the change from 210.9 to 212.9 which is 0.9% as published.

So you do not get "an RPI value based on the month 1 at rate 1, etc" based on the percentage between month 1 and month 1 a year earlier, you get the increase from month 0 to month 1, month 0 to month 2 etc. Month 0 being the anniversary month.
So what I have concluded is that
- if you cash in early, you will never get less than your anniversary value
- if you keep it until the maturity/anniversary, you will get (at minimum) the annual interest.

EalingSaver

Lansdowne wrote: »

Right, the first thing to get clear is the RPI is an Index. Retail Prices Index. Just like The FTSE 100 Index is at this moment 4128.37 - reflecting the level of share prices this morning. The latest Retail Prices Index is 212.9 reflecting prices in the shops in December. Last month it was 216.0 and a year ago, based on prices in December '07 it was 210.9.
So RPI inflation is the change from 210.9 to 212.9 which is 0.9% as published.

Agreed and undestood.

Lansdowne wrote: »

So you do not get "an RPI value based on the month 1 at rate 1, etc" based on the percentage between month 1 and month 1 a year earlier, you get the increase from month 0 to month 1, month 0 to month 2 etc. Month 0 being the anniversary month.

Mostly agreed. i.e. values are calculated using the RPI rate applicable at the time of aniversary or cashin between aniversaries. I had taken this to mean e.g. cash in at month 5 (after at least one aniversary) then 5/12 * RPI rate applicable at that time. (And there are a few twists about which RPI rate is used, which I think if I have it right if you cash in January, you don't get Dec rate applied you get Jans, but only for the period up to end of Dec).

Lansdowne wrote: »

So what I have concluded is that
- if you cash in early, you will never get less than your anniversary value
- if you keep it until the maturity/anniversary, you will get (at minimum) the annual interest.

Still not convinced that is rock solid. Becuase there is nothing that I can see that says the the index linked portion can never be negative, only that the total value at cash in (i.e. aniversay value plus linking plus interest) will never be less than the aniversary value.

One thing I really couldn't get my head around is clause 16 i.e. calculation of index linked value. Howver, now I do....thanks to your post. When it is referring to A and B its talking about the actual index figure, NOT the RPI rate. So its B/A IS the RPI.

So, bottom line is, cash-in value of my certs which are past their first aniversary HAVE been dropping in value. Damnnnnnnnnnnnnn.

So the next judgement call to make is when RPI is likely to go up again. Cash in now and it won't even be Decs rate that will be used it will be Jans, which is going to be even worse.

martinman3

EalingSaver wrote: »

Mostly agreed. i.e. values are calculated using the RPI rate applicable at the time of aniversary or cashin between aniversaries. I had taken this to mean e.g. cash in at month 5 (after at least one aniversary) then 5/12 * RPI rate applicable at that time.

Unfortunately, using the RPI rate wont help because the RPI rate is the %age change over the last 12 months, and you use just the few months from last anniversary date until cash in.

I now tend to agree with others here that the NS&I calculators only give anniversary values as mentioned in clause 8.

If RPI drops between anniversaries you still get the fixed interest added to the last anniversary value with no index-linking, clause 11.

What the value is if you cash in between anniversaries if RPI has fallen since last anniversary is anybodys guess.

EalingSaver wrote: »

So, bottom line is, cash-in value of my certs which are past their first aniversary HAVE been dropping in value.

They have not dropped but are probably at the last anniversary value.

EalingSaver

OK, re-reading clause 11 and some other bits. It seems to me that the Ts and Cs do give a floor of 0% on the RPI element on Aniversary/Maturity values. i.e. aniversary/maturity values are always the prior one or purchase price plus the fixed interest element at a miminum.

But I can't find such a floor for cash in values between aniversaries.

EalingSaver

martinman3 wrote: »

They have not dropped but are probably at the last anniversary value.

Not what I meant. I know they haven't dropped below their last anivseray value, but their cash in value now is almost certainly lower then it would have been say 1 month or even 2 months ago. e.g. if they were for example at aniversary plus 8 months now. Sinply because the calculation of the index part would have been substantially higher.

EalingSaver

martinman3 wrote: »

Unfortunately, using the RPI rate wont help because the RPI rate is the %age change over the last 12 months, and you use just the few months from last anniversary date until cash in.

Got it. I hadn't thought this through enough. Yes, RPI is now compared with 12 months ago. But they don't actually use RPI. They use index change since last aniversary against the locked in aniversary value. Logical. And to think I'm actually meant to be pretty good at numbers.