NS&I Saving Certificates

MarkFromCornwall

moneylover wrote: »

feel so grumpy I could cry. Over the years I have learnt so much from this site but the NS&I has beaten me and I still dont understand even after all the kind postings in this thread. I would like to save if this is a good product but obviously not unless I understand what I am doing.
I do not understand why the high RPI of 5.3% is being trumpeted as a reason for buying if the rate of inflation is likely to drop over the next year. If a year from now its lower than now then all I would get if I took my money out would be 1%.? For example if RPI was 6.3% then the interest would be 2% (minus the bit they reduce it by if you cash in early) but if it was 5.3% or lower I would just get 1% Is this right?

No, in your example, you'd get 6.3%+1%=7.3% and if it was 5.3% you'd get 5.3%+1%=6.3%. The only thing that could catch you out would be if inflation was high for most of the year but then dropped a lot, because the RPI figure they use is on one particular date near the end of the year.

Mark

Sceptic001

Moneylover, there is so much confusion on these boards, sadly mostly caused by MSE over-hyping what is a very good product with misleading headlines, that the best advice is to read the simple explanation given by NS&I:

With our Inflation-Beating Savings, you can be sure that the value of your savings will stay ahead of any increase in the Retail Prices Index over the investment term. This gives you real peace of mind.

Because inflation fluctuates, you won’t know exactly how much you are going to receive until your Certificates mature. But you can be sure that your money will have more spending power.

This is a great product when prices are rising.

StevieJ

Who is on a wind up

Consumerist

hippyshakes wrote: »

. . but I really don't think 7.9 % is possible in real terms

Quite so. Only about 1% is available in real terms (i.e. above inflation).

When following RPI you should really follow the actual index which, over a year, is used to calculate the annual change in RPI; the percentages themselves are a very blunt instrument since they only measure the changes in the index over a one-year period.

Hope this helps you a little.

JoeCrystal

Consumerist wrote: »

Quite so. Only about 1% is available in real terms (i.e. above inflation).

When following RPI you should really follow the actual index which, over a year, is used to calculate the annual change in RPI; the percentages themselves are a very blunt instrument since they only measure the changes in the index over a one-year period.

Hope this helps you a little.

I was under impression that each month NS&I Index-Linked SCs's Index-linking are based on two months ago RPI Index right? For example, taking it out in March will be tied to January RPI Index for next three/five years? Right?

Sceptic001

JoeCrystal wrote: »

I was under impression that each month NS&I Index-Linked SCs's Index-linking are based on two months ago RPI Index right? For example, taking it out in March will be tied to January RPI Index for next three/five years? Right?

Yes.
Purchases in May will use 220.7, the RPI figure for March (published in April)
Purchases in June will use 222.8, the RPI figure for April (published yesterday)

So to benefit from the big increase announced yesterday, you need to invest before the end of May.

moneylover

I am no nearer understanding but thanks to those who have tried to help
All I want to know - if I invest (say) £10000 and take it out after a year and RPI is lower than now, will I only get 1% or thereabouts-(I know its slightly lower than 1%)OR if its,say, 3% RPI at the end of the one year is it 4%?
I wont ask again but thought I would have one more try before I give up completely...I am not usually so dim about savings.....

MarkFromCornwall

moneylover wrote: »

I am no nearer understanding but thanks to those who have tried to help
All I want to know - if I invest (say) £10000 and take it out after a year and RPI is lower than now, will I only get 1% or thereabouts-(I know its slightly lower than 1%)OR if its,say, 3% RPI at the end of the one year is it 4%?
I wont ask again but thought I would have one more try before I give up completely...I am not usually so dim about savings.....

It's about 4%.

Mark

Sceptic001

moneylover wrote: »

I am no nearer understanding but thanks to those who have tried to help
All I want to know - if I invest (say) £10000 and take it out after a year and RPI is lower than now, will I only get 1% or thereabouts-(I know its slightly lower than 1%)OR if its,say, 3% RPI at the end of the one year is it 4%?
I wont ask again but thought I would have one more try before I give up completely...I am not usually so dim about savings.....

RPI stands for Retail Price Index, not the inflation rate. If the RPI falls below its current level of 222.8 this will mean that prices have fallen in absolute terms and yes, you will only get the 0.85% bonus after one year.

However, the chances of this happening are very low. The Bank of England is hoping that the rate of inflation will fall back to its target of 2% by next year. If this happens you will get 2% + 0.85%. Others are predicting much higher rates of inflation.

JoeCrystal

Sceptic001 wrote: »

Yes.
Purchases in May will use 220.7, the RPI figure for March (published in April)
Purchases in June will use 222.8, the RPI figure for April (published yesterday)

So to benefit from the big increase announced yesterday, you need to invest before the end of May.

I thought so, that is why I spread my savings into Index-Linked SC every month. That should yield me overall measure of inflation hopefully.

First Anniversary Interest:
January (Saved in March): 3.7+0.75 = 4.45%
February (Saved in April): 3.7+0.75= 4.45%
March (Saved in May): 4.4+0.75= 5.15%
April (Saved in June): 5.3+0.75= 6.05%

I hope that is right anyway...