NS&I certificates

ffacoffipawb

hutchingsp wrote: »

So what's the catch/downside with these assuming I have £15k that I'm not planning on touching but want somewhere safe with a reasonable return?

If you cash them in before the first anniversary, you just get your money back, no interest.

After that you get index linking plus a bit of interest on top. Tax free.

dqnet

Quick question, how does one know how much he has invested.. I've left my certificates at my other house and i've forgotton
I want to top up to the full 15k but I dont know how much i've bought already :l

lisyloo

So what's the catch/downside with these assuming I have £15k that I'm not planning on touching but want somewhere safe with a reasonable return?

The downside is if inflation falls and then the return could be less than savings account.
What you could do is keep it under review.
That's what I'm doing.
You are only tied in for 12 months after that you can withdraw without any penalty (you might lose a few odd days as you'd get up to a monthly anniversary).

I am personally looking at it as a 12 months investment for RPI+0.25%.
Then see where we go after that.

lisyloo

Quick question, how does one know how much he has invested

Have you tried calling them?

hutchingsp

lisyloo wrote: »

The downside is if inflation falls and then the return could be less than savings account.
What you could do is keep it under review.
That's what I'm doing.
You are only tied in for 12 months after that you can withdraw without any penalty (you might lose a few odd days as you'd get up to a monthly anniversary).

I am personally looking at it as a 12 months investment for RPI+0.25%.
Then see where we go after that.

I read it that you can withdraw at any time within the first 12 months, but you'd get no interest?

hutchingsp

masonic wrote: »

The only downside is that inflation falls back more severely than predicted. The worst case scenario is that you just get the 0.5% interest if the RPI isn't any higher on your anniversary date. That is very unlikely. Personally, I'll be very pleased if I get a 4% return from these at my first anniversary.

I ran some numbers through the interest calculator on the NS&I website based on a random purchase date of 1/1/2009. The value of the certs is way more than a savings account would offer on the same amount. Presumably that's because of the last year or so and things have now stabilised somewhat?

Ark_Welder

hutchingsp wrote: »

I ran some numbers through the interest calculator on the NS&I website based on a random purchase date of 1/1/2009. The value of the certs is way more than a savings account would offer on the same amount. Presumably that's because of the last year or so and things have now stabilised somewhat?

Would offer? Or would have offered? The compare should be made against the relevant fixed-rate bonds that were available at the start of 2009, not the ones that are available today.

Past performanace of the rate of inflation is no guide to the future rate of inflation performance...!

masonic

hutchingsp wrote: »

I ran some numbers through the interest calculator on the NS&I website based on a random purchase date of 1/1/2009. The value of the certs is way more than a savings account would offer on the same amount. Presumably that's because of the last year or so and things have now stabilised somewhat?

There are two reasons why the older certs would be expected to have higher returns than those bought recently.
1) RPI inflation has been relatively high since 2010 and is expected to slow in the coming 12-18 months.
2) The certs used to offer the % change in RPI +1%. It is now +0.5%.

For a look into historic RPI inflation see this table. Rates are not always as high as they have been in the past couple of years.

dqnet

oh yea... oops

ffacoffipawb

masonic wrote: »

There are two reasons why the older certs would be expected to have higher returns than those bought recently.
1) RPI inflation has been relatively high since 2010 and is expected to slow in the coming 12-18 months.
2) The certs used to offer the % change in RPI +1%. It is now +0.5%.

For a look into historic RPI inflation see this table. Rates are not always as high as they have been in the past couple of years.

My November 2008 certificate has done well despite earning just 1% in year one due to negative RPI in September 2009.