NS&I Saving Certificates

StevieJ

Sceptic001 wrote: »

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.

A small point, the BOE target (2%) is CPI, I think RPI is likely to be higher than CPI in the future.

Consumerist

moneylover wrote: »

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%?

If the RPI (the actual index value) is lower than now then yes you will only get the 0.85% fixed interest at the first anniversary.

If the annual percentage inflation rate in a year's time is lower than it is now, you will receive that percentage inflation plus 0.85%

There is a common confusion between the RPI index and the annual change in the RPI index which is quoted in percentage terms as the inflation rate.

It's a bit difficult to explain the distinction but I hope this helps.

lisyloo

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

So do people generally think it's worth rushing out to get these?
Is it a "no brainer".
I have some debt, but either at 0% or 0.99% (although this could rise - BOE+0.49).
I pay 40% tax and ISAs are full.

colind2

I had a quick look at the latest Treasuries RPI forecast for 2010/2011 from the HM treasury website. (Not alllowed to post links apparently)

They seem to predict that RPI for 2010 + 2011 will be around 3%.

Maybe this info is already out of date though?

StevieJ

colind2 wrote: »

I had a quick look at the latest Treasuries RPI forecast for 2010/2011 from the HM treasury website. (Not alllowed to post links apparently)

They seem to predict that RPI for 2010 + 2011 will be around 3%.

Maybe this info is already out of date though?

If that is true, (and previously they have underestimated) that would give an estimated return of 6.66% for a HR tax payer (assumed bonus of 1% for simplicity), not bad in these time of meagre returns and bearing in mind the cert would have to be kept for at least one year.

lisyloo

I too found consesus forecast for 3% for 2010 and 2011.

I find these grossed up figures uselesss.
I have about £100K in tax free savings/investments.
Why would I want to compare with some imaginary figure if I was paying tax, when there is no good reason to pay any?????

StevieJ

lisyloo wrote: »

I too found consesus forecast for 3% for 2010 and 2011.

I find these grossed up figures uselesss.
I have about £100K in tax free savings/investments.
Why would I want to compare with some imaginary figure if I was paying tax, when there is no good reason to pay any?????

What about to compare with non tax free alternatives, the tax free options are not always the best option even with their tax free status, just look at some variable rate ISA's.

lisyloo

the tax free options are not always the best option even with their tax free status, just look at some variable rate ISA's.

Perhaps not at 20%, but I think they are at 40%.
If you don't agree, please show me some places where can can get a good return NET of 40% tax please.
But you have answered my question to a degree. It might be useful information to 20% tax payers which is a lot of people.

JamesU

lisyloo wrote: »

Perhaps not at 20%, but I think they are at 40%.
If you don't agree, please show me some places where can can get a good return NET of 40% tax please.
But you have answered my question to a degree. It might be useful information to 20% tax payers which is a lot of people.

That's pretty simple. Investment in any asset that makes a capital gain. Typically £10.1K/individual or £20.2K/partners. If gains realised with the right timing between financial years rises to £20.2K and £40.4K respectively.:)

JamesU

JamesU

colind2 wrote: »

I had a quick look at the latest Treasuries RPI forecast for 2010/2011 from the HM treasury website. (Not alllowed to post links apparently)
They seem to predict that RPI for 2010 + 2011 will be around 3%. Maybe this info is already out of date though?

They are just forecasts, nothing to rely on, and for sure, already out of date. Between January - April of this year RPI inflation is at 2.2%, and on target to be well ahead of a 3% average, and likely to exceed this significantly in the FY Apr 2010-2011.

JamesU