MSE News: NS&I inflation-beating savings to return

nrsql

snooping_around wrote: »

If I was to invest in the index linked certificate, what rate would I get for this yr? Is the RPI updated monthly or yearly?

No one knows what you wil get. It depends on the value of the RPI when you cash it in (and how long you hold them).

RPI is calculated monthly.

RPI 2 months ago was lower than it is now. DOn't get confused between the index value and the annual percentage increase which depends on what the value was a year ago.
On the anniversary you will get the annual percentacge increase as that wil be the same as the anual difference but what the value was before that doesn't matter. In fact things like VAT changes in the past distort the value and you need to factor them out to estimate the coresponding value.

lisyloo

Although depending on how long you've had them you'll be getting a higher rate of interest on them presumably. Might need some sums doing.

Yes you're right (again). Thanks for pointing that out.
I'd only be cashing them in during an emergency, so I am willing to take the chance of the 12 month tie-in.

artha

[QUOTE=snooping_around;43558462

Also a previous poster said the index link is based on the growth in RPI index from 2 months before the purchase date, which is worrying as 2 months ago RPI was high! Surely if this is meant to ensure your money has the same spending power, then it the interest rate will be the whole RPI + 0.5%![/QUOTE]

Can someone just clarify this please. If certificates are purchased in May is it the actual March RPI (published April ?) that applies as the baseline or the figure published in March(Feb RPI?).

Reaper

artha wrote: »

Can someone just clarify this please. If certificates are purchased in May is it the actual March RPI (published April ?) that applies as the baseline or the figure published in March(Feb RPI?).

I suggest you look on the NS&I web site.

Which month’s RPI do we use?
In calculating your index-linking each year, we use the RPI figure from two months before the month you invest. This is because:

• it takes a couple of weeks for the ONS to compile the index, so they publish each month’s RPI figure during the following month; and
• we use the same RPI figure for all Certificates bought during a particular month.

For example, if you invested in March, we would use the January RPI figure (published by the ONS part way through February) as your RPI start level. Your RPI end level for the first year of your investment would then be the January RPI figure of the following year.

snooping_around

...........

Stochasticity

artha wrote: »

Can someone just clarify this please. If certificates are purchased in May is it the actual March RPI (published April ?) that applies as the baseline or the figure published in March(Feb RPI?).

If you purchase this May, it is the March 2011 RPI figure (published in April) that counts as the baseline.

That March 2011 RPI figure is 232.5, as evidenced here...

http://www.statistics.gov.uk/downloads/theme_economy/rp02.pdf

And it's the March 2012 RPI figure (published in April 2012) that will be used to calculate the index-linking that will be paid to you in May 2012.

Reaper

snooping_around wrote: »

If I invested in a NS&I Index linked certificate in May 2011, then the interest I would recieve in May would be 4%+0.5%, interest in June would be 4.2%+0.5% and interest in July would be 4.1%+0.5%?

No. The interest you get over the year will be the RPI figure over the year +0.5% (or less if you cash it in early).

Don't be confused by newspapers telling what the RPI is this month. It's a bogus figure arrived at either by comparing prices a year ago (historical and not relevant to the future) or looking at the change over a 1 month period and multiplying by 12 to give an annual figure (highly unlikely to be accurate).

Stochasticity

snooping_around wrote: »

Ok making sense now!

Example: Lets say March 2011 RPI was 4%, April 2011 RPI was 4.2% and May 2011 RPI was 4.1%...

If I invested in a NS&I Index linked certificate in May 2011, then the interest I would recieve in May would be 4%+0.5%, interest in June would be 4.2%+0.5% and interest in July would be 4.1%+0.5%?

Sorry im new to all this investing:o

Not quite.

Example: Let's say that the annual increase in RPI from March 2011-March 2012 was 4%, the annual increase in RPI from April 2011-April 2012 was 4.2% and the annual increase in RPI from May 2011-May 2012 was 4.1%.

If you invested in a NS&I Index-Linked Certificate in May 2011, then the index-linked portion of your interest that you would receive in May 2012 would be 4%, plus 0.25% of your original investment. So, for £15,000 invested, you would receive £15,637.50 on the first anniversary which is rolled over and becomes the starting point for the calculation of your next year's interest.

If you invest in June 2011, then the index-linked portion of your interest would be 4.2% for the first year. If you invest in July 2011, then the index-linked portion of your interest would be 4.1% for the first year.

nrsql

snooping_around wrote: »

Ok making sense now!

Example: Lets say March 2011 RPI was 4%, April 2011 RPI was 4.2% and May 2011 RPI was 4.1%...

If I invested in a NS&I Index linked certificate in May 2011, then the interest I would recieve in May would be 4%+0.5%, interest in June would be 4.2%+0.5% and interest in July would be 4.1%+0.5%?

Sorry im new to all this investing:o

Doesn't matter what happens between the anniversary or your cash in date.
You certainly don't get the increment every month.

Take the RPI at the base date, take the current RPI - the difference as a percentage of the base value will give an indication of the percentage increase of your certificate.

oldvicar

The interest earned is:

1) Peace of mind that you money will keep its current value in real terms (ie will keep pace with a generally accepted measure of inflation - RPI)
2) a bit extra on top.

I am not a financial adviser, but in these uncertain times I think it is an extemely suitable investment for granny, widows, orphans, and those who don't want to lose sleep at night worrying about their savings.