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MSE News: Maximise your savings as inflation bites
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Why does the online calculator change month by month say between 12 -23 months if the actual figure is not changing? I assumed that the RPI + extra % was incremental once the initial 12 months was up.
So what you are saying (if I understand correctly) you only receive interest payments on the anniversary dates and you can can lose up to 12 months interest in the 1st 2nd or 3rd years if you cash in at the wrong time:eek:
The calculator also adds on index linking in year 1.
Having said that I'm now doubting myself about what happens at 12+ months. The terms under the calculator suggest you get index linking up until cash-in point.
EDIT: Yes, I was wrong. From the web site FAQs:
"If you cash in your Certificates any time after the first year, you will earn index-linking and extra interest for each complete month you’ve held them."0 -
Don't think I'm splitting hairs too finely ... to point out the LLoyds TSB (Classic + Vantage) pays 4% (for balances between £5k - £7k).
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.
Maybe I got lucky as they say but I have 4 of these accounts, have had them for quite a while, perhaps they tightened up on the number subsequently after I got mine. I did ask the other day, with tongue in cheek if I could have another - but you can guess the answer!0 -
Just received the weekly MSE email, which implies that investing now would earn 4.7% tax-free.
"Lock cash in for 3 years with NS&I's index linked savings & get inflation plus 1% = 4.7% TAX-FREE"
Very misleading in my opinion.
Quite simply, we don't know what the ongoing rate of inflation will be nor the interest rates that will be on offer. Over the period covered by the figures referred to in the article there were accounts from Coventry BS offering 6.25% and from Birmingham Midshires/Saga close to 7.00% until December 2009. If ongoing inflation is within the BoE targets then there are currently instant access accounts paying in excess of 3.5% that would give a positive return to both basic and higher rate tax payers. Some economists think there's a possibility of exceeding the targets while others expect the return of deflation.
Similarly the statement “Martin Lewis, MoneySavingExpert.com creator, says: 'The imperative right now is for everyone to earn the maximum rate.'" could be taken as advice to lock into the five year fixes that currently offer the maximum rates. That could be terrible advice if inflation is significantly higher than expected. So what does that advice mean?
It would have been more useful to have told people the factors that could influence ongoing inflation (or deflation) so that they could make informed decisions on their savings strategy which could include fixed-rate options or IL 'granny-bonds' (which savers are not locked into as stated).0 -
MSE clearly aren't listening, as they have yet again repeated the exact same misinformation in their latest article at http://www.moneysavingexpert.com/news/banking/2010/03/a-year-at-05-base-rate-what-next-for-savers-and-borrowers0
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MSE clearly aren't listening, as they have yet again repeated the exact same misinformation in their latest article at http://www.moneysavingexpert.com/news/banking/2010/03/a-year-at-05-base-rate-what-next-for-savers-and-borrowers"If you want to guarantee to beat inflation, for savings up to £15,000, National Savings & Investments (NS&I), the Government run bank, has index-linked savings paying 1% above the Retail Prices Index inflation figure (currently 3.7%), tax-free, that's designed so you lock your money away for three years. It currently pays 4.7%, after tax."0
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Rollinghome wrote: »If NS&I or any bank were advertising their products in that misleading way they'd be hung from the rafters. Makes the Daily Mail look like the oracle of financial truth.
I suppose they would defend themselves by saying that IL certs are complicated to explain compared to plain vanilla savings accounts, so the current RPI annual rate of change is being used merely to illustrate the point... but it is misleading.
Also, it's not "after tax". It's not taxed in the first place.0 -
Drawn in by Martins email headline "Save 4.7% tax free", I've just been trying to understand this and I agree with previous posters that Martin's email is very misleading to people like me who have not looked at index-linked savings before. I am very surprised Martin has written something that misleading.
Given the following extracts:
http://www.nsandi.com/products/ilsc/tandc
"16. An index-linked value will be calculated as V x B/A where:
(a) 'V' is the value of the Certificate at the beginning of the index-linked period (this will be the purchase price or the value at an anniversary date);
(b) 'A' is the Index figure applicable to the calendar month in which the first day of the index-linked period falls (this day will be the purchase date or an anniversary of it); and
(c) ‘B’ is the index figure applicable to the calendar month in which the day after the final day of the index-linked period falls. This will be the maturity date, an anniversary date, or the day after the last completed month for which index-linking is earned."
Example:
http://www.nsandi.com/files/asset/pdf/illustrative_example.pdf
would it be better if you started investing when the index hasn't just had an unusual upward move? Are people buying anyway, does it seem worth it for those of us worried about inflation?0 -
Its just a hedge against inflation taking off. As an example I have just had a 3 yr 1 mature. It returned about 4% gross over the 3 years. Fixed rates over the same period returned 6-7% gross. If I had kept my eye on the ball I would have cashed it in earlier/ Nevertheless at a time when noone knows what will happen to inflation its usefull to have some index linking.
The monthly figures just indicate a trend, and if you are unlucky enough to invest in a month when lots of upward out of the ordinary movements were applied (VAT increase, increased fuel tax etc ) which will fall out of the figures in 12 months time - you could potentially get a 12month RPI applied which is lower than the trend.0 -
would it be better if you started investing when the index hasn't just had an unusual upward move? Are people buying anyway, does it seem worth it for those of us worried about inflation?
Actually, the index dropped 0.1 points between December and January (which is the current figure). The reason inflation is high is because the index dropped unusually in January 2009.
I would say that past inflation is not a guide to future inflation. Index-linked savings are a good way to protect against high inflation but a risky way of trying to beat interest rates.0 -
I would say that past inflation is not a guide to future inflation. Index-linked savings are a good way to protect against high inflation but a risky way of trying to beat interest rates.
In the future there is a very real danger that inflation will take off but the Bank of England will keep rates low in which case they would be ideal. However for MSE to say that time is now based on just 2 months of unusual inflation figures is premature.
The only danger in waiting is if they drop the rate on a new issue. However I think I am right in saying the lowest it has ever been is +0.7% in which case the current +1% rate is nothing special.0
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