Inflation Linked Savings discussion area

le_loup

s20544 wrote: »

(I know these are crystal ball type questions but it would be useful for me to know if the majority of people think each case is likely or unlikely)

Ah! The wisdom of crowds. If 99% of the population believe in little green men, would that make their existence certain?

Glen_Clark

Telegraph article on index linked savings certificates/bonds: http://www.telegraph.co.uk/finance/personalfinance/comment/10007012/NSandI-index-linked-savings-certificates-Bring-Thatcher-bonds-back-Mr-Osborne.html

Rollinghome

suelees1 wrote: »

Yesterday I decided to renew/extend mine for the full 5 years. For the past few years I've been loathe to opt for a 5 year fixed rate, laughingly believing interest rates would increase and I'd be stuck with a lowish rate. However as we all know things haven't improved and now interest rates seem to be at an all time low so I decided the 5 year option looks the best option.

I renewed some in Feb for 5 years (then RPI +0.25%) and will probably do the same again this month (now RPI +0.15% on offer).

My reasoning, without much conviction, was that there's every chance of future offerings being less attractive still, possibly following CPI rather than RPI, and the penalty for coming out of the 5 year cert after 3 years isn't too harsh anyway.

All indexation for the year of exit is lost but if that's minimal if done just after an anniversary, similarly 90 days loss of interest at just 0.15% pa isn't exactly eye-watering. Only thing that would make me stamp my foot would be if they moved the goalposts on the way RPI is calculated.

kidmugsy

Rollinghome wrote: »

Only thing that would make me stamp my foot would be if they moved the goalposts on the way RPI is calculated.

I thought that it was remarkably dim of the government to consider that; I was relieved (and somewhat impressed) when they announced that they'd binned it.

Middle_Sister

My 3 year NS&I index linked saving is coming to an end. It was earning 6.3%. I know I can carry it over for another 3 or 5 year term but dont know what the actual rate of interest will be.

alanq

6.3% pa for each of the past 3 years? I think not - unless you are quoting the equivalent rate that you would have to have earned in an account paying interest from which 20% tax would have been deducted.

No one can tell you what the return will be for the next 3 years as it will depend on the growth of RPI. Unless anything has changed very recently you will be offered RPI+0.15%.

Middle_Sister

Oh, I'll have to check my paperwork but that's what I've noted on my spreadsheet. Must have seen that figure somewhere though. Will check.

alanq

See the amendment that I made to my previous post about equivalent rate from taxable interest.

The NS&I calculator estimates that £10,000 deposited on 1st May 2010 would now be worth £11,598 which I reckon is close to 5% pa tax free (the equivalent of 6.25% taxed at 20%).

Sceptic001

Middle_Sister wrote: »

Oh, I'll have to check my paperwork but that's what I've noted on my spreadsheet. Must have seen that figure somewhere though. Will check.

You probably saw the 6.3% quoted on this website when inflation hit 5.3% in mid-2010.

There was much criticism of MSE on this forum at that time because the figure implied you would receive 6.3% when in fact that was the figure you would have received had you invested a year earlier. As it happened, inflation did remain above 5% for over a year and is still north of 3%, so your investment decision was a good one. :beer:

Even though the bonus rate has now fallen to 0.15% and penalties have been introduced for early encashment, most people (including me) still think ILSCs are a good bet for savers, especially taxpayers.

itm2

My 3-year NS&I certificate is expiring in the next few weeks. I want to stay invested, but need to decide on a 3-year or 5-year term - both are RPI+0.15%
Is there any reason to go for a 5 year term instead of 3 years??