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

Paul_Herring

StevieJ wrote: »

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.

People complicate it because people like you (try to) over-simplify it and mislead others, just as you're doing here.

Some people see an inflation figure (of, um, lets say 5.3%) and see that NS&I add 1%. And come up with a figure of 7.9% (lol-wut?). And assume that's what they're going to get. Based on stuff that's already happened, not what is going to happen. i.e. regardless of anything else happening over the next 3-5 years.

Which is the whole point of this thread. The account will only pay '7.9%' under certain, unlikely, circumstances. (i.e. that inflation remains static at 6.3%pa over 3-5 years - or at least it works out that way by month 36 or 60, that basic rate income tax remains at 20% over those same 3-5 years, and that the investor remains a basic rate earner.)

Incidentally, your over-simplistic reply implies that (assuming there were such a thing as a 3 month term investment) if inflation is 5% one month and 10% the next then -15% the one after, that there would be 1.18%[1] interest over the three months, when in fact there would only be 1% interest.

[1] 100*1.06 = 106.00, 106*1.11= 117.66, 117.66*0.86=101.18

StevieJ

Paul_Herring wrote: »

People complicate it because people like you (try to) over-simplify it and mislead others, just as you're doing here.

Some people see an inflation figure (of, um, lets say 6.3%) and see that NS&I add 1%. And come up with a figure of 7.9% (lol-wut?). And assume that's what they're going to get. Based on stuff that's already happened, not what is going to happen. i.e. regardless of anything else happening over the next 3-5 years.

Which is the whole point of this thread. The account will only pay '7.9%' under certain, unlikely, circumstances. (i.e. that inflation remains static at 6.3%pa over 3-5 years - or at least it works out that way by month 36 or 60, that basic rate income tax remains at 20% over those same 3-5 years, and that the investor remains a basic rate earner.)

Incidentally, your over-simplistic reply implies that (assuming there were such a thing as a 3 month term investment) if inflation is 5% one month and 10% the next then -15% the one after, that there would be 1.18%[1] interest over the three months, when in fact there would only be 1% interest.

[1] 100*1.06 = 106.00, 106*1.11= 117.66, 117.66*0.86=101.18

Yes that post will be really helpful to the people who don't understand how NS&I tax free inflation adjusted certificates work

BTW one of the things that confuse me about your examples, (and I may look really stupid here) but why do you (for example) multiply by 1.06 to get a return of 5%?

23rdian

Some people might find the following page useful. As it allows you to flick easily between years. Hint, it's the Year on year differential that makes the % figure.

http://www3.hants.gov.uk/finance/retailpricesindexandconsumerpriceindex.htm

fimonkey

wooo I'm more confused than I ever was! .. I have most of my savings in a cash ISA paying 3%, I am about to invest 1K into a FTSE all shares tracker and add £100 p.m to this,.. and the I have 5K left which is sitting in a pitiful account probably loosing capital cos the interest rate is so poor and its been eroded by inflation....

.... As a simple-ish person and BR tax payer do I move this 5K to an 'inflation proof product' which is how the NSI product has been marketed, or do I keep it in an account where its actually decreasing in value?

Paul_Herring

StevieJ wrote: »

Yes that post will be really helpful to the people who don't understand how NS&I tax free inflation adjusted certificates work

It wasn't meant to be 'helpful,' it was meant to point out that simplifying stuff beyond all recognition is about as helpful as you seem to think my post was.

BTW one of the things that confuse me about your examples, (and I may look really stupid here) but why do you (for example) multiply by 1.06 to get a return of 5%?

RPI (in my example) = 5%, NS&I add 1% to give 6%.

To increase something by 6% you multiply by 106% which is 1.06.

I didn't think that bit was terribly difficult <shrug>

Paul_Herring

23rdian wrote: »

Some people might find the following page useful. As it allows you to flick easily between years. Hint, it's the Year on year differential that makes the % figure.

http://www3.hants.gov.uk/finance/retailpricesindexandconsumerpriceindex.htm

... but, but, but it only goes up to 2010 - we need to know what it is in 2013/2015!

DiggerUK

fimonkey wrote: »

I am about to invest 1K into a FTSE all shares tracker and add £100 p.m to this,..
.... As a simple-ish person and BR tax payer do I move this 5K to an 'inflation proof product' which is how the NSI product has been marketed,

Move to NSI IL.
Lose the FTSE Tracker as well.

StevieJ

Paul_Herring wrote: »

It wasn't meant to be 'helpful,' it was meant to point out that simplifying stuff beyond all recognition is about as helpful as you seem to think my post was.



RPI (in my example) = 5%, NS&I add 1% to give 6%.

To increase something by 6% you multiply by 106% which is 1.06.

I didn't think that bit was terribly difficult <shrug >

I thought your example was over a 3 month period so why are you adding 1% for the bonus, you really have a confused mind

JamesU

Paul_Herring wrote: »

It would appear there's little point. They've ignored previous attempts at telling them they're misrepresenting rates, and yet they still do it.
Is there perhaps a "free to use, free of ads, uk consumer revenge" site we could post about it on?

Jonbvn wrote: »

Nope! Can't think of one:p

Daily Mail?

JamesU

ali137

Hi

Can someone please answer my question, if i invest £12000 in the Ns&I RPI linked account and i closed the account after 1 year what interest will i get.

I have used the savings calculator and it shows i would get £756 interest for the year based on 6.3% is that correct??

Is the interst paid monthly or yearly??

I know that RPI rate can very throught the whole year.