Time to buy indexed-linked savings certificates?

nrsql

The reason for taking the annual rate is to remove seasonal variations.
Unfortunately it will also include unusual variations during the year.
So there's no right or wrong answer - the annual change is useful as is the monthly change.

The RPI has been skewed do to the lowering of the BOE rate - assuming this does not go negative the affects should start to disappear towards the later half of the year and we should be back to CPI like changes next year.

This is assuming the main difference bewteen CPI (3.2%) and RPI (0%) is due to the BOE rate.
Note if the BOE rate increases again we will probably see the RPI greater than the CPI.

I still feel the weakness of sterling will cause inflation over the next few years.

Myrmidon_J

trenchwars wrote: »

Those are the annual rates of change. The retail price index was 210.1 in January and 211.4 in February, so RPI (and CPI) are both rising. In effect, prices rose 0.6% from January to February.

As KieranB said, it is the annual rate of change (0.0%) that is used to calculate the index-linked portion of the returns on index-linked savings certificates...

I assumed, from the nature of your question, that you were interrogating the (potential) returns on index-linked products - which, of course, are entirely unknown!

trenchwars

Myrmidon_J wrote: »

I assumed, from the nature of your question, that you were interrogating the (potential) returns on index-linked products - which, of course, are entirely unknown!

Well that doesn't mean we can't speculate

[Deleted User]

well I have speculated again and bought the 5 year issue for two of us. I have been buying over the past five years with the first batch due to mature in october this year and I will be rolling them over and over again. Its a great worry-free way to save for possible care in old age or with a bit of luck, for holiday upon holiday in later life

ray123

Why not purchase some bonds that rise in connection with the inflation rate in Zimbabwe. You could turn a £1 into a million... or a billion!

JoeCrystal

I put a third of my 'Savings' share away into NS&I Index Linked Saving Certificates every month. (Well, only been doing it since start of this month but I am planning to do so)

poppy10_2

ray123 wrote: »

Why not purchase some bonds that rise in connection with the inflation rate in Zimbabwe. You could turn a £1 into a million... or a billion!

Bad idea - Zimbabwe is now undergoing deflation:

http://news.bbc.co.uk/2/hi/africa/7962998.stm

scomjak

KieranB wrote: »

Because thats not how it works. The inflation figures are calculated over the period of one year. Its what the Bank of England use, what the government use, what all financial institutions use. Its what the media use, its what the UK public use. Its the annual figure that every country across the globe uses.

More importantly, its what ALL indexed-linked savings certificates (the nature of your question) use!

Month on month can fluctuate massively due to the short time scale and the fact seasons can effect it.

Hi Kieran B, I would really value your help. I took out 3 year index-linked bonds...RPI plus 1%.
Until recently, each week when I looked in the Sunday Times and saw that the RPI was around 5%, I felt really smug, believing that I would be getting 5% + 1% = 6% annual interest (tax free).
I assumed that an RPI of 5% meant that the annual rate of inflation for that week (compared to the same week 1 year ago) was 5%.
Is that wrong? I think I read that if I bought my bonds in February 2006 with an RPI of 5%, then if the RPI at the anniversary date in February 2007 is still 5% I would get an RPI of 0% plus 1%. That seems all wrong as surely the index has increased by 5% ???
Help!!!

jep49

So all in all is this now the time to be getting into ns&i index linked.

JoeCrystal

Hmmm, This is how I think index-linked savings certificates worked:

In your case, on February 2006 to February 2009 whose RPI index on these months are,

02/2006: 194.2
02/2007: 203.1
02/2008: 211.4
02/2009: 211.4

Therefore: Index linked change as interest rate are (without interest):

02/2007: 4.58%
02/2008: 4.08%
02/2009: 0%

But the thing with Index-linked Savings Certificates is that I am entirely not sure which month they measure, a month before or the month Certificates get purchased.