MSE News: Maximise your savings as inflation bites

ManAtHome

Reaper wrote: »

Not the way I read it. The maximum is £15,000 per issue.

Yes, but you can roll-over matured certs into whatever current issue without affecting any new payments into that issue. Problem is every so often thay have 'not worth bothering' rates so not always a no-brainer to roll them over.

For any rolled-over certs, you don't have to hang on for a year to get the advertised rate+RPI.

Simples... (yeah, right).

[edit] Yes, the 'earn x% over y years' is the advertising blurb NS&I use whenver they have a 'good' month - definitely not guaranteed.

stphnstevey

How does this stack up against mortgage overpayments?

ManAtHome

Depends on your mortgage rate.

Jonbvn

Reaper wrote: »

Not the way I read it. The maximum is £15,000 per issue.

Yes it is!

• You can hold £15k in 3 & 5 years certs gives £30k.
• Approx. 2 issues per year gives £60k.
• If you hold as a couple gives £120k.
• You can also hold in trust gives £180k.

You may want to reconsider.

Jonbvn

david78 wrote: »

Index linked certs are a good product. The only downside is that it is difficult to keep track of the current value of the certificate as the calculators provided on the site are "pants" (to use a Martinism). Its would be good if NS&I provided on online account to keep these certificates in with automatic calculation of index linking and interest.

I agree. It would be nice to have online management of these accounts, rather than just bits of paper.

Jonbvn

Zebra wrote: »

Very misleading in my opinion.

Not it's not! See the warning in bold.

The article online says the following:

Offical inflation's hit a 13-month high at 3.5%, higher than the interest on ALL easy access accounts, meaning in real terms everyone's cash is shrinking (see losings not savings news). Yet there's a way to beat this... Inflation Linked Savings: NS&I, the govt-run savings bank, has 'index linked savings' paying a big 1% (it was only 0.7%) above Retail Price Index (RPI) inflation, TAX-FREE for three years (max £15,000). RPI's now 3.7%, so that's a 4.7% after-tax rate - to earn that in normal savings a basic rate taxpayer would need get 5.9% pre-tax (higher rate 7.8%) and rates that high don't exist. For a small interest penalty you can access your cash after a year. Warning! The rate varies. It’s important to understand the rate you earn varies each month with inflation and while some predict it’ll be reasonably high going forward, that’s not guaranteed. At half its current rate, the product's beatable by top savings deals. Last year inflation was negative and, if it drops, so does the interest you're locked into (though you're at least guaranteed to get growth in 'real terms')

keet83

I looked more into this myself and understand that even if you withdraw after 12 months you still beat inflation by 0.85%, 24 months 0.95%, although is it an annual interest or a monthly interest? what happens if you withdraw on the 14 or 17 month for example?

Mikeyorks

_Guy_Anker wrote:

A MoneySavingExpert.com investigation shows there is not a single taxable easy access savings account that pays at least 3.5%, the current rate of inflation.

Don't think I'm splitting hairs too finely ... to point out the LLoyds TSB (Classic + Vantage) pays 4% (for balances between £5k - £7k).

Admittedly it's marketed as a current account (and needs £1k monthly funding to trigger decent interest), but it's easy access and FP enabled ... which makes it very useful. And, reading the multiple threads on the subject over the last few months, it's clear many people are holding the maximum 3 accounts and simply using it as a Savings account.

chardir

Jonbvn wrote: »

Not it's not! See the warning in bold.

The article online says the following:

Offical inflation's hit a 13-month high at 3.5%, higher than the interest on ALL easy access accounts, meaning in real terms everyone's cash is shrinking (see losings not savings news). Yet there's a way to beat this... Inflation Linked Savings: NS&I, the govt-run savings bank, has 'index linked savings' paying a big 1% (it was only 0.7%) above Retail Price Index (RPI) inflation, TAX-FREE for three years (max £15,000). RPI's now 3.7%, so that's a 4.7% after-tax rate - to earn that in normal savings a basic rate taxpayer would need get 5.9% pre-tax (higher rate 7.8%) and rates that high don't exist. For a small interest penalty you can access your cash after a year. Warning! The rate varies. It’s important to understand the rate you earn varies each month with inflation and while some predict it’ll be reasonably high going forward, that’s not guaranteed. At half its current rate, the product's beatable by top savings deals. Last year inflation was negative and, if it drops, so does the interest you're locked into (though you're at least guaranteed to get growth in 'real terms')

I would still argue that this is misleading. The rate you earn does not vary each month, the rate you earn is actually the RPI inflation after 12, 24 and 36 months. The 4.7% quoted is completely irrelevant - if you invest now you won't start earning at that rate for a month, then earn next month's rate for a month, which is what the article seems to imply (in my reading of it).

I think the NS&I inflation linked savings are great (and have some myself) but advertising them now just because inflation was high for the last year is not helpful.

Currently the headline on the tips page says "Save 4.7% tax-free". This is simply not true.

keet83

i have that lloyds account however its 4% before tax where as the NS and I account is tax free, therefore it is 3.14% where as this NS and I account is 1% above RPI and is not taxed therefore it is now higher than the lloyds account