NS&I certificates

kulath

What about the several ISA 5-year accounts that pay RPI plus 2% (Kent Reliance BS) and 1.5% (Yorkshire BS)? The headline interest addition sounds better that NS&I - what is the catch, and why don't all the newspapers compare these accounts with the NS&I?

Sceptic001

kulath wrote: »

What about the several ISA 5-year accounts that pay RPI plus 2% (Kent Reliance BS) and 1.5% (Yorkshire BS)? The headline interest addition sounds better that NS&I - what is the catch, and why don't all the newspapers compare these accounts with the NS&I?

NS&I certificates can be cashed in with index-linked returns after one year. The index-linked ISAs tie you in for the full term, meaning that you will be stuck with poor returns if inflation falls later in the fixed term.

Baldur

kulath wrote: »

What about the several ISA 5-year accounts that pay RPI plus 2% (Kent Reliance BS) and 1.5% (Yorkshire BS)? The headline interest addition sounds better that NS&I - what is the catch, and why don't all the newspapers compare these accounts with the NS&I?

Haven't looked at the YBS account but the KRBS ISA, unlike the NS&I product, does not permit early access (other than transfer to a different ISA provider, when it will only return the original amount deposited with no interest).


<Edit> Having had a quick look at the YBS product, both it and the KRBS 2% and 1.5% figures are not the AER but the total gross percentage interest earned over the 5 year period (YBS 0.29% AER; KRBS 0.39% AER).

bigfreddiel

kulath wrote: »

What about the several ISA 5-year accounts that pay RPI plus 2% (Kent Reliance BS) and 1.5% (Yorkshire BS)? The headline interest addition sounds better that NS&I - what is the catch, and why don't all the newspapers compare these accounts with the NS&I?

the sunday times did just that comparison - 5yr 5% isa won

fj

Sceptic001

bigfreddiel wrote: »

the sunday times did just that comparison - 5yr 5% isa won

fj

Wow, it is very impressive that the Sunday Times knows what inflation will be in the next five years! :rotfl: Do you have a link?

bigfreddiel

Sceptic001 wrote: »

Wow, it is very impressive that the Sunday Times knows what inflation will be in the next five years! :rotfl: Do you have a link?

Only quoting the ST - don't ask me how they know - ask them

Well of course know one knows - not even the experts - so my advice is this - your savings should include a mix of NS&I ILSCs - Cashi ISAs - S&S ISAs - some ready access savings (at least 3 months salary or better still 6 montghs) - pay off all your debts 1st, then your motgage - pay into a pension, unless you don't want 20% free cash - the mix of savings depends on your risk aversness - and thats about it.

Of course no one will actually do all of that and we will all make bad decisions - look at me 1997 on the dole 2011 about to retire with golden final salary pension, paid off mortgage - no debts - £300k in a mix described above - fall into the sweet spot as far as SP goes, i.e. 2016 when we all get £155+/week and not into the 2018 zone waiting an extra year - bring it on!

portchieboy

Do I have this wrong???

I read that the interest paid was the difference in RPI each year.

So, if yr 1, it started at 4%, then 12 mths later was 3%, you only get paid 0.25%.

Same calc cumulative each year. So, you don't get paid lterally RPI plus bonus, if RPI drops (currently high), it may be pretty rubbish.

If I have that wrong, can someone please explain!

Ta

le_loup

You have it wrong.
If it's 3% next year, you get 3% plus the interest.

hethmar

I think you have it right.:)leloup

dtsazza

portchieboy wrote: »

Do I have this wrong???

I read that the interest paid was the difference in RPI each year.

So, if yr 1, it started at 4%, then 12 mths later was 3%, you only get paid 0.25%.

The first part is correct, but you've misunderstood what RPI is (you're taking the rate of change twice). RPI is an index, a number like 232.5 (the value for March 2011). RPI inflation measures how much the index has changed over a given period, and that's what the "4%" figures mean (for example, the value of RPI in March 2010 was 220.7 and so RPI has risen 5.3466% over those 12 months).

So, if RPI started at 230, and then 12 months later was 220, you're right that you only get the 0.25% portion. But if the change in RPI over the first 12 months is 3% (e.g. it goes from 232.5 to 239.5), then you'll receive 3.25%.

It doesn't matter at all what the "current" (i.e. last year's) inflation rate is, only how the index changes over the next 12-60 months. If inflation was currently 20% and then went to 3% next year, you'd get 3.25%. If inflation was currently 0% and went to 3% next year, you'd still get 3.25%.