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

RayWolfe

No. And no one can answer your question. We do not know what inflation will be in 12 months time.
Ignore the article and read the posts.

JamesU

ali137 wrote: »

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.

Cut and paste from previous post:

Interest paid annually.

Index linked certificates will give approx 1% interest (the bonus, 0.85% in after 1 year) + any % inflation from the time you invest until the time you withdraw (provided they are held for at least a year). It is a personal choice regarding whether or not inflation will be higher or lower in the future, nobody can predict this.

And just remember that when you read that %RPI or returns on ILCs are XX% (5.3%, 6.3%, 7.9% or any other figure), they are all wrong and should be ignored. Why? they always refer to the last 12 months inflation, and are not the return you will receive in the next 12 months. Simple.


JamesU

ali137

thanks for the reponse, i think i will go for the aa savings account. NS&I account is so bloddy complicated.

Sceptic001

ali137 wrote: »

thanks for the reponse, i think i will go for the aa savings account. NS&I account is so bloddy complicated.

Before you finally decide, consider this: The AA account pays 2.8% (taxable) with instant access. If you don't require access to your money for a year, ILCs will pay RPI + 0.85% (tax free) after one year, so inflation as measured by the Retail Price Index (currently 5.3%) must fall below 2% (lower if you are a taxpayer) for you to break even on the AA account.

The Bank of England is hoping that inflation as measured by Consumer Price Index (currently 3.7%) will fall to 2% next year. Other forecasters project a much higher rate of inflation, in which case ILCs will be the clear winner.

I hope this helps. It is very sad that people are being deterred from ILCs because MSE is over-hyping them - presumably the very opposite effect that MSE is intending.

StevieJ

RayWolfe wrote: »

No. And no one can answer your question. We do not know what inflation will be in 12 months time.
Ignore the article and read the posts.

This seems a reasonable explanation (from the article) to me of potential downside.

If inflation drops you could earn a poor rate

It's important to understand the rate you earn varies each year with inflation and while some predict it’ll be reasonably high going forward, that’s not guaranteed. At half its current rate, this product's beatable by top savings deals.
Last year inflation was negative. However, if this happens, you still earn the fixed interest portion of the rate. So, if the RPI is lower in three years time than it is now, you will still have earned 1% tax-free on your money (i.e. the capital is safe and you are guaranteed some interest)
As the interest is calculated year on year, this means that if the RPI fell in year one, you would still earn the fixed interest part of the rate. Then for year two, if RPI rises (even if it didn't increase above the level it was at the start of year one, you'd still get index linking plus the fixed interest.
Yet as it's guaranteed to be higher than inflation and tax free, at least you know your money will always grow quicker than prices will rise.

bendix

It would have been good to have seen either Martin Lewis or MSE management come onto this thread and deal with the issues and concerns expressed in it.

But perhaps they are too busy or don't care about. Never mind, but they'd do well to remember that this website is nothing without the forum members.

They've certainly lost my trust.

RayWolfe

As Stevie points out, the article ain't bad. They could leave that and change the headlines. However, the number of questions raised by this article shows that something is seriously wrong.
Now we have people saying, "It's so complicated that I won't bother". Such a shame, they are VERY good for a portion of savings and they are NOT complicated.

StevieJ

RayWolfe wrote: »

As Stevie points out, the article ain't bad. They could leave that and change the headlines. However, the number of questions raised by this article shows that something is seriously wrong.
Now we have people saying, "It's so complicated that I won't bother". Such a shame, they are VERY good for a portion of savings and they are NOT complicated.

I think they are taking notice of these threads and updating the articles without making it obvious.

ali137

Sceptic001 wrote: »

Before you finally decide, consider this: The AA account pays 2.8% (taxable) with instant access. If you don't require access to your money for a year, ILCs will pay RPI + 0.85% (tax free) after one year, so inflation as measured by the Retail Price Index (currently 5.3%) must fall below 2% (lower if you are a taxpayer) for you to break even on the AA account.

The Bank of England is hoping that inflation as measured by Consumer Price Index (currently 3.7%) will fall to 2% next year. Other forecasters project a much higher rate of inflation, in which case ILCs will be the clear winner.

I hope this helps. It is very sad that people are being deterred from ILCs because MSE is over-hyping them - presumably the very opposite effect that MSE is intending.

Now you got me thinking again, was going to open the aa account but now cant decide.

My intension is to have the NSI account open for 1 year then close it. If inflation rate is currently 5.3% and next month say it falls to 5.00 and the rates very between the 12 month, how do NSI calaute the interst i should be getting at the end of my 1 year.

I presume if i depoist £12K in NS&I at 5.3% + 085% for month 1 the interst would be £59.83. Is that right???

Sorry for asking stupid question.:)

Sceptic001

No, interest on ILCs does not accrue monthly, it depends on the one-off annual change in inflation. So the rate you get will be the rate of inflation this time next year. That is why it is impossible to predict.

If you are saving 12k, why not put half into the AA account and half into ILCs. Then you are diversified, which is always a good idea.