MSE News: How to beat inflation - earn 7.9% on your savings

Rollinghome

artha wrote: »

Has anyone tried to contact anyone on the main site to raise the issues aired on the forums?

They were told how confusing their claims were back in March before they sent the email out. https://forums.moneysavingexpert.com/discussion/2310315 Martin Lewis replied to the thread saying that it wouldn't confuse. So yes, he's fully aware.

Following his email people were going into post offices asking for the account that pays 4.7%. Now they'll be asking for the one that pays 7.9%

If any bank made such misleading claims the regulators would be all over them.

StevieJ

Paul_Herring wrote: »

The initial problem is with the headline.

If nothing else it draws peoples attention to a good product.

chris_m

Indeed, but in the wrong way IMO.
You COULD have got 7.9% if you'd taken out a 3-year one 3 years ago - you could get anything from 1% upwards in three years time if you took one out today.

poppy10_2

StevieJ wrote: »

If nothing else it draws peoples attention to a good product.

It's a good product, but the headline is horribly misleading. People who took out the index-linked certificates in April 2009 with their anniversary date in April 2010 will have earned (just under) 6.3% over the last year. That's absolutely no guarantee if you take out the certificates now that you will earn anything near that amount over the next year, any more than a 10% rise in the stock market one year guarantees a 10% rise the next.

The claim "earn 7.9% on your savings" is outrageous and the site should take it down immediately.

melbury

I felt really hopeful when I saw this headline, but on checking the NS&I site, I honestly didn't understand exactly what they are paying, it certainly didn't look that good.

23rdian

Misleading, yes. But traffic is traffic

Problem is the product is rather complicated. I understand the trick is to buy them when rates are low. If you want to make the same gains you are going to need to inflation to hit double digits in the next few years. But if you do think that's going to happen*, well...

* printy printy

kaspar

so its not simply inflation + 1% each month as interest?

RayWolfe

23rdian wrote: »

I understand the trick is to buy them when rates are low.

No it isn't.
There is no trick. Inflation will be what inflation will be.
toss a coin twenty times on tails ... what are the odds on the 21st toss? 50/50

Paul_Herring

23rdian wrote: »

Misleading, yes. But traffic is traffic

Nail, meet head.

kaspar wrote: »

so its not simply inflation + 1% each month as interest?

No, it's not. Nor is it 'inflation is 12% this month, you'll get 12% on your savings for the next 36/60 months' if inflation has gone negative in 3/5 years time.

This is the reason behind the comments near the head of the thread - you *would* get the equivilant of, if you're a 20% income tax payer, and invested for the past 12 months, 7.9%.

You're not going to get anywhere near 7.9% if (whatever)PI sinks to 0% in year 3 or goes up to 90% in year 5.

The 'investment' is based on the xPI when you put the money in and tie it in for 3 or 5 years. And the xPI when it comes to withdraw it. Martin's (or the copywriter's) figure is based on putting it in 12 months ago, and you're withdrawing it today.

This falls in two important aspects:
a) It's using past performance, (have your seen that term elsewhere?)
b) It's using a term shorter than is available.

Hence the earllier implied comment by DH about 'the market went up by 40% last year, you're promising 40% this year?'

Nice misleading headline about a(n arguably good) product, but totally misleading about the outcome of it.

StevieJ

kaspar wrote: »

so its not simply inflation + 1% each month as interest?

That is what it is, although the 1% is per year not per month, I assume you meant future inflation (RPI). I am not sure
why some people wish to complicate it.