Ns&i

philbostavros

Hi

A while back, Martin Lewis advised that the NS&I Index-linked Savings Certificates where a good place to invest up to £15k.

Is this still considered to be the case? I think I am right that my wife and I could invest the max amount each now and then the same amount again after 7th April?

I have seen another thread where there was a lot of debate about how the rates are calculated but it left me a bit confused.

I am happy to tie the money up for at least 2 years (if that is a good idea?) maybe 3 years.

Any advice welcome.

Thanks

C_Mababejive

My view is that these are a good product in the current climate and will produce a fair return for some time. Much fairer than in nearly all savings accounts and most ISAs. I have bought in.

EalingSaver

philbostavros wrote: »

Hi

I think I am right that my wife and I could invest the max amount each now and then the same amount again after 7th April?

I have seen another thread where there was a lot of debate about how the rates are calculated but it left me a bit confused.

I am happy to tie the money up for at least 2 years (if that is a good idea?) maybe 3 years.

Any advice welcome.

Thanks

I think you need to do a bit more research so you fully understand them, as you don't seem to have a good grasp of what these are.

The April date you mention: are you thinking tax years??? If so, its irrelevant.

NSI Index bonds are done as 'Issues'. (Last time I looked we were still on Issue 19 for the 3 year, nd have been for some time).

There are 3 year and 5 year issues at any one time. You can invest a maximum of £15k into each of these (i.e. up to £15k into 3 year issue 19....). Once you have topped out, you can only buy more if they do a new issue.

Are they a good investment? Depends on many things. Their advantage is that a) they are index linked with an additional 'top up' e.g. RPI + 1% so you are at least guaranteed they will keep pace with RPI, and b) the gain is free of income tax.

Although they are term based products, they can be cashed in early if required. However if cashed in before one year you'll only get your original cash back, no interest. Also bear in mind that the top up interest (i.e. the +1% element) is 'geared': that is the per annum rate you would get, on top of RPI, if you held for full period.

I think this website has in the past been inadvertently misleading in regard to touting these as a very good investment at a time when the RPI is high. If RPI is say at 3% then the argument goes invest because you will get 3% + 1% tax free. But this is lazy thinking. What matters is not the RPI rate TODAY, but the RPI rate on say the first anniversary. That is a lot different, as what matters is what you think will happen to inflation between now and then.

P.S. I would add that I hold about £50k of 3 year term ones at different issues. Having got somewhat burnt in the past, I now judge timing of purchase based on keeping an eye on the underlying RP Index, not the headline RPI number which is the %age change compared to 12 months ago. I wouldn't necessarily suggest you have to do that: I did it as we were going through wild swings in RPI. But interestingly - see my point above - this led me to make an additional purchase while the headline RPI % was actually negative, because the actual index had bottomed out and was starting to climb.

RayWolfe

You can do some now and some on 7th April ... new issue.
As part of a balanced portfolio, they are a good thing ... for me at least, others mileage may be different.

JamesU

EalingSaver wrote: »

I think this website has in the past been inadvertently misleading in regard to touting these as a very good investment at a time when the RPI is high. If RPI is say at 3% then the argument goes invest because you will get 3% + 1% tax free. But this is lazy thinking. What matters is not the RPI rate TODAY, but the RPI rate on say the first anniversary. That is a lot different, as what matters is what you think will happen to inflation between now and then.

Ealing, have to be careful how you describe this or your post will also be confusing and misleading (obviously unintentional). More specifically, the current % RPI of 3.7% at present DOES NOT mean you are guaranteed to receive 3.7 + 1 = 4.7% interest. What matters is the RPI today (219.2) and the RPI in a years time (unknown at present), and the interest you will get will be based on this difference between the RPI values. This is how the interest is calculated and it should not be confused with the current % RPI of 3.7%. This is the "lazy thinking" that Ealing has correctly mentioned and confuses a lot of people.

And yes this is covered in depth in the link below.

RW, nearly time for an Easter perrry?

JamesU



NS&I Index-Linked Savings: Q&A
http://forums.moneysavingexpert.com/showthread.html?t=2340725

EalingSaver

JamesU wrote: »

More specifically, the current % RPI of 3.7% at present DOES NOT mean you are guaranteed to receive 3.7 + 1 = 4.7% interest. What matters is the RPI today (219.2) and the RPI in a years time (unknown at present), and the interest you will get will be based on this difference between the RPI values. This is how the interest is calculated and it should not be confused with the current % RPI of 3.7%. This is the "lazy thinking" that Ealing has correctly mentioned and confuses a lot of people.

Agreed. That is exactly what I thought I had said ! Not sure what I put in that implied otherwise?? I was trying to say that the argument has been made on this website in the past - in MSE recommendations - that because RPI rate is high that means you get a high rate. And as we both agree, that is very misleading.

Ignoring the recent 18 months of total RPI turmoil (which is it is fair to say is unusual), it is still reasonable to take a view that a time of high current RPI rate is arguably not the best of times to buy. Why? Because it will often represent close to peak with BOE bank rates having already been adjusted upwards to counter inflation (with it being accepted that it takes about 12-18 months for rate changes to really affect inflation).

Of course we are in unusual times, and there is a reasonable view that BOE and Govt. may well be inclined to let a period of above target inflation prevail for a period.

EalingSaver

RayWolfe wrote: »

You can do some now and some on 7th April ... new issue.
As part of a balanced portfolio, they are a good thing ... for me at least, others mileage may be different.

Thanks for the news that there is a new issue coming up !! Where was that posted/advertised? Is there a way of being notified by NS&I when this is imminent?? If so, they seem to have missed me out on the mailing !!

I'm max'd out on 3 year issue 19. Might consider taking out some new issue.

Sceptic001

EalingSaver wrote: »

Thanks for the news that there is a new issue coming up !! Where was that posted/advertised? Is there a way of being notified by NS&I when this is imminent?? If so, they seem to have missed me out on the mailing !!

I'm max'd out on 3 year issue 19. Might consider taking out some new issue.

They haven't sent out an email to savers yet (not me at any rate) but they issued a press release on 16/3/10 which I posted here [can't find a "blowing your own trumpet" emoticon:D]

RayWolfe

JamesU wrote: »

RW, nearly time for an Easter perrry?

Just started, then out for dinner and jazz and another small glass.
Cheeeeers

RayWolfe

EalingSaver wrote: »

Thanks for the news that there is a new issue coming up !! Where was that posted/advertised?

It's pre announced on their website ... quite unusual, I think. (Incidentally, same rates as 19.)

alanq

Brought to our attention in this thread.

http://forums.moneysavingexpert.com/showthread.html?t=2341877