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

KTF

Ok,I have applied online with my debit card and received the email saying my start date is today.

Does anyone know when payment is taken? Will it be this evening or after I have returned all the proof of id, etc?

Consumerist

KTF wrote: »

Does anyone know when payment is taken? Will it be this evening or after I have returned all the proof of id, etc?

It's usually taken straight away.

maypole

I don't really understand about inflation, I just need to know if these are a good idea, I wouldn't need to touch the money for the term.

Consumerist

maypole wrote: »

I don't really understand about inflation, I just need to know if these are a good idea, I wouldn't need to touch the money for the term.

They are not for everybody. If you don't understand them, best advice is to avoid them. It is likely that you will need to judge if/when it is wise to jump ship and this judgement differs from person to person..

maypole

Consumerist wrote: »

They are not for everybody. If you don't understand them, best advice is to avoid them. It is likely that you will need to know when it is wise to jump ship and this judgement differs from person to person..

Thank you, I just want somewhere to leave money and not be concerned about it till the fix is over, so maybe these aren't for me if I have to watch them.

michaelsacker

I don't understand how they work out the RPI on each anniversary?
Is it an average?
Say I took it out now 5.3% in March - then next March its 4.8% What rate do I get?

Their illustration is even more confusing.

They took March 2005 as starting - RPI 3.2%
March 2006 RPI was 2.4%

They worked out the interest on £10k was £238.22 = 2.3822%

What am I missing here?

Consumerist

maypole wrote: »

Thank you, I just want somewhere to leave money and not be concerned about it till the fix is over, so maybe these aren't for me if I have to watch them.

If you prefer to just forget about them and be sure that the real value will at least be maintained then they may be just what you need.

If, however, you want to maximise your return when interest rates may be about to rise then you really need to understand when interest rates are not keeping pace with inflation.

From what you have said, they may be a good idea for you.

Consumerist

michaelsacker wrote: »

I don't understand how they work out the RPI on each anniversary?

The Office for National Statistics publishes an index each month which is used to calculate "inflation". The change in the index over a year, as a percentage, is called annual "inflation". There are two main indices: CPI and RPI - NS&I uses the changes in RPI to calculate indexation.

Hope this helps.

Rollinghome

michaelsacker wrote: »

I don't understand how they work out the RPI on each anniversary?
Is it an average?
Say I took it out now 5.3% in March - then next March its 4.8% What rate do I get?

Their illustration is even more confusing.

They took March 2005 as starting - RPI 3.2%
March 2006 RPI was 2.4%

They worked out the interest on £10k was £238.22 = 2.3822%

What am I missing here?

You can totally disregard the "current" rate of inflation, which is in fact the inflation over the past 12 months. It's history and irrelevant. If the cost of living as measured by the RPI has gone up bysay 3% in the 12 months following your start date then you'll get 3% plus 0.25%.

So the question you have to decide is how much you'll get compared with say an ordinary 1 year fixed rate account, bearing in mind that the NS&S bond is tax free so the benefits will depend on your tax position and whether you've already used your ISA.

The reasons for the inflation we've had has been things like the VAT hike, transport costs, food prices etc. So you need to guess if these will continue to rise strongly and whether other savings rates might rise.

JamesU

michaelsacker wrote: »

I don't understand how they work out the RPI on each anniversary? Their illustration is even more confusing. What am I missing here?

Have a read through this previous post on how to calculate ILCs. Need to understand the difference between RPI and %RPI and how to use them (example is for 3yr ILCs and 1% bonus, but principles the same):

http://forums.moneysavingexpert.com/showpost.html?p=33144345&postcount=52

JamesU