Inflation Linked Savings discussion area

Acremead

jemball wrote: »

So it's a bit of a gamble, bearing in mind that the BOE may well start raising its rate in September, which could reduce the RPI.

but not much of a gamble, as you are not locked in? As I understand it, you can take your money out at any time but if you take your money out within the first year you get no interest at all. But after that if you withdraw your money you will get interest calculated as inflation + the %age given in the table (the table being tiered so that it equates to 0.5% pa if kept for the full 5 years). So presumably it needs keeping an eye on after the end of year one and the money taken out if inflation drops so much and rival interest rates rise so much that the product no longer makes sense......?

Sceptic001

jemball wrote: »

I guess that the RPI is unlikely to ever drop and its increase is unlikely to fall below the BOE target of a 2% maximum?

In fact it does occasionally go negative (as it did for part of 2008-09 when mortgage rates plummeted), but in such cases NS&I use 0% so your initial capital is never eroded.

So you could say that you should always get 2.25% tax free, ie %2.85 before tax.

No, if annual inflation is positive, you always get the inflation rate. As you can see in the example you quote above, in Year 4 (2008-09) the actual inflation rate was 0.14% and they paid 0.14%.

I don't know how many mortgages are directly linked to the BOE base rate, so cannot comment on its effect on the RPI.

I don't know either, but it is a significant proportion of the RPI because it reflects the proportion of people's income spent on their mortgage.

I do wonder if the NS&I would really commit to paying well above retail deposit interest rates? Maybe they know something we don't.

If inflation is above retail deposit rates then they are committed to pay.:j

MiserlyMartin

jemball wrote: »

So it's a bit of a gamble, bearing in mind that the BOE may well start raising its rate in September, which could reduce the RPI.

Mervyn King and his cronies at the MPC haven't got the guts to raise rates, and even if they do finally start raising - it will only do paltry amounts. I can't see rates much above 2.5% in the next 2 years. By then you would have made far more in NS&I.

Who knows what will happen after that but its obvious that they don't give a stuff about savers and the prudent. They would rather have the prudent saver suffer in order to bail out the reckless over borrowed who partially caused this financial crisis in the first place.

C_Mababejive

This whole thing can be very confusing for most people..

My thoughts..I dont think interest rates will rise significantly for at least two years because as post #24 suggests, the BoE MPC are not as independent as they claim to be,they are puppets and bottlers and they will not raise rates significantly. There might be a little teaser coming along,but nothing much.

The other thing is..i bought a 15k cert dated 5/2/2010 and checking today,it says its value is £16,309.50

Is that value now locked in or is it just an "on day" valuation which could go down in the near future?

If it is locked in,presumably that full value is then carried over to the following year?

ta

le_loup

No. The value at 5/2/11 is locked in.

Financial_Adviser

do not cash your ISA's in for thie NS&I cert!!! You're money will only be tax-free with your NS&I cert for as long as you hold it - if you're not happy with your returns after year 1 (inflation is set to drop slightly) and you cash it in you can't re-invest it back into your ISA's (the one's you cashed in). So keep them in - 3% + is a good rate for a flexible ISA.

Sceptic001

Note to Financial Adviser:
Please can you read the rest of this thread about how interest is calculated on index-linked certificates and please remove your grossly misleading post on the other thread? Many thanks.

le_loup

Financial_Adviser wrote: »

You're money will only be tax-free with your NS&I cert for as long as you hold it

It's very nice for you to join us ... but could you please do your homework before pontificating about something you clearly do not understand!

cepheus

Interesting article here, even NS&I don't understand their own product!

NS&I: We misled savers on inflation bonds

National Savings & Investments is retraining its staff after dishing out misleading information to savers about its inflation-busting bonds...

Arthurian

cepheus wrote: »

Interesting article here, even NS&I don't understand their own product!

NS&I: We misled savers on inflation bonds

National Savings & Investments is retraining its staff after dishing out misleading information to savers about its inflation-busting bonds...

Link didn't work for me. Maybe this one will....
http://www.thisismoney.co.uk/savings...5&in_page_id=7