Inflation Linked Savings discussion area

cepheus

Arthurian wrote: »

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

No it doesn't! Perhaps the site is changing their URLs. My original one, now works for the time being here it is again

NS&I: We misled savers on inflation bonds

airmark

One thing to point out: if you have a mortgage you should not buy these bonds as you already have a huge leveraged long inflation - short interest rates bet in place, so you don't need to double up. If you are a renter/saver and feel that the BOE's policy is transferring wealth from you to your landlord and all the other homeowners, then load up.

kar999

MiserlyMartin wrote: »

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.

I posted this elsewhere but an interesting article in last weekends Financial Times about the BoE's current "policy" on inflation (according to Charlie Bean Deputy Governor)....

http://www.ft.com/cms/s/2/933fea12-8...#ixzz1NXuFCDaQ

....So much for the suggestion on the Bank’s website that it “sets interest rates to keep inflation low to preserve the value of your money”.
Instead, it turns out, the deputy governor for monetary policy, Charlie Bean, said in Belfast this week that the MPC’s “chosen approach” has been to accept “a temporary period of above-target inflation” as the price of preventing a double-dip recession.

The maddening thing, of course, is that there isn’t much you can do about this without taking major risks. Obviously, if you haven’t already done so, you should buy the NS&I inflation-linked certificates (which will pay you RPI plus 0.5 per cent tax-free for five years).

ohit

I am looking at this product for about £9k of cash. I only intend to hold it for about 14-15 months from now.
If I understand the article on this site correctly, the RPI % change from 2 months ago (i.e. April) will be taken for account openings now in June. So, looking at this site:
http://www.statistics.gov.uk/cci/nugget.asp?id=19

That means RPI of 5.2%

So if I put the cash in now and keep for just 14 months, I will achieve 5.2% + 0.25% (1st year of the 5 years rate).

This sounds too simple to be correct. Where is it flawed?

It must really be tax-free savings product for me. The ~3% easy access or 1 year fixed accounts would return next to nothing after my tax is taken off the interest.

Remember, this particular lump sum of cash will only be available to earn savings interest for the next 14-15 months.

lisyloo

That means RPI of 5.2%

no, no, no

That figure means the increase in RPI for the LAST 12 months was 5.2%
You will get RPI (plus the increment) for the NEXT 12 months, the starting point being whatever the index was in April.

14-15 months is fine.
The tax free bit is fine.
But none of us know what return you will get (personally I think RPI will remain relatively high, so I'm IN).

kar999

lisyloo wrote: »

.... (personally I think RPI will remain relatively high, so I'm IN).

Ditto... It looks like the BoE is still viewing inflation as the price worth paying by keeping rates low to stimulate growth.

Some pudits say they dont expect rates to rise before November.

lisyloo

Interest rate futures point to March/April 2012.
I think rates will be lonw for a low time yet.

ohit

Awesome all - thank you. Hopefully I clear at least 3-4% tax-free.

seemskerfuddled

Instead of buying a tax free cash isa 2011/12 paying max 3.3%p.a, is it worth putting the money instead in the NS&I index-linked saving certificate tax-free 5 year knowing that I can take it out anyway after the first year and probably getting a better return as inflation is rising for at least the next 12-18 months?

kidmugsy

seemskerfuddled wrote: »

Instead of buying a tax free cash isa 2011/12 paying max 3.3%p.a, is it worth putting the money instead in the NS&I index-linked saving certificate tax-free 5 year knowing that I can take it out anyway after the first year and probably getting a better return as inflation is rising for at least the next 12-18 months?

That's my guess.