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

parkranger

Hi

probably mentioned in posts earlier but how misleading is the original MSE announcement of 18th May
current rates, some earn equiv of 9%. Save £100 to £15,000 for five years in NSI's inflation-linked certificates and you get tax-free interest, equal to RPI inflation plus 0.5% a year. At the current 5.2% rate a basic rate taxpayer would need 7.1% to beat this from a normal account, a higher rate payer 9.5% – both unachievable as top five-year fix is 5.05%.

On first reading, it would apper that savers would get the current inflation rate plus 0.5 pct which is not quite the case. Personally found this very misleading and badly worded.

Consumerist

parkranger wrote: »

On first reading, it would apper that savers would get the current inflation rate plus 0.5 pct which is not quite the case. Personally found this very misleading and badly worded.

MSE presentation of this subject has been widely criticised in the past and with some justification. Whilst they don't say anything which is factually incorrect, it could, nonetheless, be misleading.

It might have been better to have said that if it were possible to invest a year ago then the return for this year would have been indexed at 5.3%. The fixed interest for the first year is 0.25% not the overall 0.5% so it does present a difficulty to explain without adding further confusion.

parkranger

Actually think that the mention of ..."At the current 5.2% rate a basic rate taxpayer would need 7.1% to beat this from a normal account, a higher rate payer 9.5%" is factually incorrect.
On the basis of the above quote there are no comparable savings schemes available but against the increase/or not in inflation plus 0.5 % there are many favourable alternatives.

What a salesman!

Sceptic001

parkranger wrote: »

Actually think that the mention of ..."At the current 5.2% rate a basic rate taxpayer would need 7.1% to beat this from a normal account, a higher rate payer 9.5%" is factually incorrect.
On the basis of the above quote there are no comparable savings schemes available but against the increase/or not in inflation plus 0.5 % there are many favourable alternatives.

What a salesman!

I think Consumerist has it about right.

If we are being pedantic about terminology, we are comparing other savings products with the inflation rate plus 0.5%, not the "increase/or not in inflation" - an important difference which has caused much confusion.

Which products do you think compare favourably with index-linked certificates?

Consumerist

parkranger wrote: »

Actually think that the mention of ..."At the current 5.2% rate a basic rate taxpayer would need 7.1% to beat this from a normal account, a higher rate payer 9.5%" is factually incorrect.

Again, a change of tense to "would have needed" (i.e. a year ago) might have clarified the meaning. But I agree that, as worded above, it could be misleading.

kar999

I think many of the financial press and correspondents were gulity of mentioning 9%+ returns by using current inflation... here's just one quote of many that google throws up...(albeit using the correct tense)

Andrew Hagger, at Moneynet.co.uk, says: “The ability to save £15,000 tax-free certainly appeals, especially to higher-rate taxpayers.
“With RPI at 5.2%, plus the 0.5% from NS&I, you would need to earn 7.125% gross from a bank or building society account (basic rate taxpayer) or 9.5% (high rate taxpayer) to match this 48th issue NS&I rate.

grumpycrab

Hi, a new investor, cheque posted on the 17th and finally cleared on the 25th. I had not received any email or snail mail so rang NS&I. Said I have to wait 3 weeks for the certificate. Is this normal? All I want to confirm is that NSandI have the money but they couldn't do that.

Consumerist

grumpycrab wrote: »

Hi, a new investor, cheque posted on the 17th and finally cleared on the 25th. I had not received any email or snail mail so rang NS&I. Said I have to wait 3 weeks for the certificate. Is this normal? All I want to confirm is that NSandI have the money but they couldn't do that.

If the cheque has cleared then I think you can safely assume that NS&I have your funds. If I remember correctly, it did take a little while to receive the cert last year but NS&I are very busy with this issue so it could take a little longer. Your certificate will run from the date of your application so the fact you haven't got the paperwork is irrelevant unless you want to cash in right now.

grumpycrab

Consumerist wrote: »

If the cheque has cleared then I think you can safely assume that NS&I have your funds. If I remember correctly, it did take a little while to receive the cert last year but NS&I are very busy with this issue so it could take a little longer. Your certificate will run from the date of your application so the fact you haven't got the paperwork is irrelevant unless you want to cash in right now.

For £15K it'd be nice to get a receipt (by any manner) a bit quicker than 3 weeks.

Consumerist

grumpycrab wrote: »

For £15K it'd be nice to get a receipt (by any manner) a bit quicker than 3 weeks.

If you paid by cheque then the cancelled cheque is effectively your receipt.