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

JamesU

juliedee4663 wrote: »

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.

A familiar story. I can only conclude that MSE Dan does not understand how the product works and that is why it is being advertised incorrectly in such a ludicrous way.

Look on the bright side, you learnt about this at the time of investing. A lot of people invest in ILCs without knowing they are not guranteed to get the interest rate currently advertised on MSE.

JamesU

barak

Sceptic001 wrote: »

.....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.

Yes, I'm in favour too, but as I discovered for my previous posting, it's the RP05 [or RPIX] index that is used for I/L Certs - i.e. the one excluding Mortgage Interest Payments.

http://www.statistics.gov.uk/downloads/theme_economy/RPIX.pdf

Sceptic001

barak wrote: »

Yes, I'm in favour too, but as I discovered for my previous posting, it's the RP05 [or RPIX] index that is used for I/L Certs - i.e. the one excluding Mortgage Interest Payments.

http://www.statistics.gov.uk/downloads/theme_economy/RPIX.pdf

No, NS&I use RPI:
How we measure inflation
We use the Retail Prices Index – known as the RPI. The RPI measures the average change in the prices of goods and services bought by most households in the UK. It is compiled and published monthly by the Office for National Statistics (ONS).
http://www.nsandi.com/products/ilsc/whyinflationmatters

JamesU

Sceptic001 wrote: »

No, NS&I use RPI:
How we measure inflation
We use the Retail Prices Index – known as the RPI. The RPI measures the average change in the prices of goods and services bought by most households in the UK. It is compiled and published monthly by the Office for National Statistics (ONS).
http://www.nsandi.com/products/ilsc/whyinflationmatters

Corrected by Sceptic:
Use RP02 table as in posts below, and not RP05 and RP07.


JamesU

Sceptic001

JamesU wrote: »

Barak's table RP05 is fine as this is a table of RPI values. Just ignore RP07 (%RPI).

JamesU

No, RP05 is an RPIX table, excluding mortgage interest.
NS&I use RPI, including mortgage interest, which is shown in table RP02

JamesU

Sceptic001 wrote: »

No, RP05 is an RPIX table, excluding mortgage interest.
NS&I use RPI, including mortgage interest, which is shown in table RP02

Sorry Sceptic, you are right, RP05 wrong table and figures, RP02 correct. Did not read RP05/07 tables carefully enough before posting, just looked at RPI vs %RPI. The RPI values required are CHAW (all items) and not CHMK (all items excluding mortgage interest). I usually just use the complete set of ONS data as in link below (download CSV to excel), second left column (CHAW).

JamesU


http://www.statistics.gov.uk/StatBas...9&More=N&All=Y

artha

JamesU wrote: »

Sorry Sceptic, you are right, RP05 wrong table and figures, RP02 correct. Did not read RP05/07 tables carefully enough before posting, just looked at RPI vs %RPI. The RPI values required are CHAW (all items) and not CHMK (all items excluding mortgage interest). I usually just use the complete set of ONS data as in link below (download CSV to excel), second left column (CHAW).

JamesU


http://www.statistics.gov.uk/StatBas...9&More=N&All=Y

So for the rest of us does the RPI used for NS&I include mortgage changes? Thanks

Sceptic001

artha wrote: »

So for the rest of us does the RPI used for NS&I include mortgage changes? Thanks

YES!
YES!
YES!
(I had to say it three times otherwise the message was rejected

Sceptic001

Bringing the thread back to its original purpose, I must say I agree with JamesU, ed123 and others that much of the confusion is caused by statements such as that by MSE (still visible on this page) "Top Savings Accounts: 5.4% tax free".

This is misleading. It is rather like saying "Egg was paying a top savings rate of 3.25% last year". Last year's figure is irrelevant. What matters is that index-linked certificates protect against any rise in the Retail Price Index (plus a bonus). Last year RPI went up 4.4%. The Bank of England is hoping that this will be reduced in the forthcoming year, which will reduce the return on ILSC.

I happen to disagree with the BoE and so think that ILSCs are a great product for anyone who can tie up their money for one year, which will give them a tax-free return of increase in RPI plus 0.85% (rising to 1% AER if held for the full 3 year or 5 year term). But to suggest that this product will return 5.4% AER is clearly wrong.

baby_boomer

I've invested in these certificates as a hedge against future inflation but I totally agree that Martin's headline claims for them are inaccurate and misleading.

There should be some form of clarification and apology but I'm not holding my breath.