5.4% tax free saving.....No Martin

Biggles

You see, it does take more than one sentence to make it clear!
;-)

musehead

I'd say it's definately confusing to have a big front-page headline on the MSE site saying:

"Top Savings Accounts: 5.4% tax-free or 2.8% easy access"

This is bordering on misinformation regarding the Index Linked Savings Certificates IMO.

MarkFromCornwall

cloudninety wrote: »

I am still confused by Index linked savings certificates. After reading the posts yesterday, I checked the NS&I website which seemed to say (as does an earlier post) that the amount paid is 1% plus the difference between RPI when you invested and RPI when you withdrew the money. Doesn't that mean that rather than protecting you against inflation, it protects you against rises in inflation? For example, if RPI is 3% when you invest and 3% when you withdraw your money, by my understanding you will only receive the 1% on your money as inflation as not increased. However inflation is still occurring, it is just the rate at which it is occurring is not increasing; therefore your money isn't protected against inflation. Or do I have this all wrong?

Yes, that is wrong. In the hypothetical event of RPI being a constant 3% you would get 4% interest.

Mark

cashbackproblems

For the sake of simplicity id rather just open a normal account paying 0.5% less and save the hassle of understanding all the above and keeping track of it!

StevieJ

Craig12 wrote: »

I see you've lost your dignity and have succumbed to these idiots.

What was that film Shaun of The Dead :eek:

artha

JamesU wrote: »

The % return you will receive in the next 12 months depends on the difference between the start RPI = 220.7 and the end RPI value in 12 months time.

The % return you will receive in the next 12 months is not related to the current %RPI of 4.4%.

The monthly %RPI figures give no meaningful indication regarding the future interest rate that will be received on the ILCs.

JamesU

This retrospective nature of %RPI is illustrated in its use in determining pay settlements/pension rises. In theory it is used to give you an income rise that puts your spending power back to where it was 12 months previously.
For instance in my case as a corporate pensioner the financial year runs from January to January but uses the October %RPI to determine the increase for the coming year. In October 2009 the %RPI was negative so in Jan 2010 it was deemed that I would get no increase as my spending power had not changed over the previous 12 months(I should be so lucky!)

JamesU

artha wrote: »

This retrospective nature of %RPI is illustrated in its use in determining pay settlements/pension rises. In theory it is used to give you an income rise that puts your spending power back to where it was 12 months previously.
For instance in my case as a corporate pensioner the financial year runs from January to January but uses the October %RPI to determine the increase for the coming year. In October 2009 the %RPI was negative so in Jan 2010 it was deemed that I would get no increase as my spending power had not changed over the previous 12 months(I should be so lucky!)

Yes for sure. Similarly with a lot of civil service pensions, from April of this year there are no increases because of deflation in 2009, and based on the month of Sep 09 when %RPI was -1.4%.

JamesU

sabretoothtigger

If you want simple, the return is a plain 1% every year if you hold the 3 year bond to its full term as intended

As well as that maybe you get lucky and win some bonus interest, nobody knows how much but its roughly based on inflation.
A thousand pounds might get between ten and a hundred pounds extra, pretty modest
Good luck

Sceptic001

sabretoothtigger wrote: »

If you want simple, the return is a plain 1% every year if you hold the 3 year bond to its full term as intended

As well as that maybe you get lucky and win some bonus interest, nobody knows how much but its roughly based on inflation.
A thousand pounds might get between ten and a hundred pounds extra, pretty modest
Good luck

While strictly correct, this is an extremely cautious view of the likely rate of inflation over the next 12 months. The Bank of England is hoping (praying???) that CPI will fall back to its 2% target. Others are looking at a possible increase in VAT, weak pound, rising fuel prices etc. and predicting anything up to 5%.

Add in the fact that any increase in mortgage rates will be reflected in the RPI (unlike the CPI) and index-linking looks like a no-brainer for anyone looking to lock in for 12 months or more.

juliedee4663

I am really angry about this, as was the woman in the Post Office who I spoke to today after I hot-footed it down there with a cheque for £15,000 to invest thinking I was getting !% plus RPI

She says they have had so many customers doing exactly what I did after reading Martin's newsletter this week.

Thankfully she explained everything to me before I parted with my money.