MSE News: NS&I revives inflation-beating savings certificates

pocketstrings

thanks to the two last posters for their kind replies - very helpful. i think i now have have my head around RPI.

the bit i now don't understand is this: am i right in thinking we therefore don't have a fixed overall 'interest rate' like with a normal fixed rate bond, for example. ie there is an element of not knowing because we do not know what the index linking amount will be, only what the interest of 0.5 will be. but qwe have the security of knowing we will not lose money or lose money due to inflation. so i'ts not like i would invest and know i'd get 5.5 at the end.

lisyloo

am i right in thinking we therefore don't have a fixed overall 'interest rate' like with a normal fixed rate bond, for example. ie there is an element of not knowing because we do not know what the index linking amount will be, only what the interest of 0.5 will be. but qwe have the security of knowing we will not lose money or lose money due to inflation.

Yep spot on.
The nominal return is unknown, the real return will be above inflation (provided you don't withdraw before the 12 months).

You aren't even tied into the 12 months.
If you had a personal financial emergency or 2 months in you decide you made a mistake you can stil take your money out.
You just won't get any return and may have lost a few % in a savings account (but you wouldn't care if it as a genuine emergency).
So you still have access to the money without penalty (except loss of interest).

spencer_cash

Really puzzled with this one I have got £14K with Vantage £25K with an ISA paying 3% and £40K with the Newcastle five year bond issue 1 to go into the NS&I with £15K which would you take it from. As my brain is now hurting.
Please help me thanks

drlabman

The first page of the application process asks for a debit card and warns that some have limits. Does anyone know what the NatWest limit is?

Consumerist

You could look at this from the other side of the fence.

If you save in a standard savings account, you will know how much interest you will earn in the account from the beginning (theoretically, anyway) but you will not know how much that money will buy when the interest is paid because inflation will have increased the cost of what you buy. With index-linking you will know (theoretically, anyway) what your money will buy at the end. Then there is the added tax-free status and Treasury backing for security to consider.

Consumerist

spencer_cash wrote: »

Really puzzled with this one I have got £14K with Vantage £25K with an ISA paying 3% and £40K with the Newcastle five year bond issue 1 to go into the NS&I with £15K which would you take it from. As my brain is now hurting.
Please help me thanks

Once you withdraw from an ISA you have lost the tax-free status on that money forever. You probably can't withdraw from the Newcastle bond without penalty. The Vantage rate and amount are reducing from 27 June so that seems to me to be the favoured option to fund the ILC(s).

pearl123

Would this product also be good for a non tax payer?

Consumerist

pearl123 wrote: »

Would this product also be good for a non tax payer?

It's obviously more attractive to tax payers but if you think inflation is going to continue being considerably higher than savings rates then it's worth considering.

The banks and Building Societies are complaining because they don't think they will be able to compete with this new issue so you can read between the lines for the next year or so, I would think.

dqnet

How is everyone dealing with this news? Is everyone opening accounts or is it not really on most's agenda?
It seems there is no real discussion about that

Consumerist

NS&I say they expected and have received high volumes of applications for this new issue but there is no telling whether it will continue.

I suspect that the longer high inflation continues, the more popular they will become and by the time most people jump they will have missed a lot of the benefit. Those in the know will make up their minds early to get in at the lowest possible starting index.