NSI Index Linked savings certificates

wriggly

Some of the replies are very close to inferring that you will definitely get 5%+ after 1 year.

It is important to realise that the current RPI rate that you see quoted is what you would have got if you had owned the certificates for the previous 12 months.

If you buy now and cash it in 12 months later, you will get the percent change in the RPI between May 2011 and May 2012. This will be the rate that is published in late June 2012, and it may be more or less than 5%. On top of that rate, you will receive an extra 0.25% in the first year.

In the worst case, they could return just 0.25% after 1 year.

I still believe they are a good deal, I just want to be sure purchasers know what to expect.

talexuser

wriggly wrote: »

In the worst case, they could return just 0.25% after 1 year.

You mean if inflation is 0% 12 months after you open? maybe theoretically so, but as much chance as winning the euro lottery I would say

TheMatrix_2

Sceptic001 wrote: »

Yes. The Bank of England is predicting that inflation will fall next year, so don't rely on getting 5%!

On the other hand, the Bank of England has been predicting a fall in inflation for the past two years and has been consistently wrong:mad:, so your guess is probably better than the BoE

That's because the government would rather print more money rather than increasing interest rates. It will get to the point where they will have to put rates up and when that happens inflation will take a nose dive.

bigfreddiel

Sceptic001 wrote: »

Yes. The Bank of England is predicting that inflation will fall next year, so don't rely on getting 5%!

Like the BoE is renowned for their predictions LMFHO

On the other hand, the Bank of England has been predicting a fall in inflation for the past two years and has been consistently wrong:mad:, so your guess is probably better than the BoE

:rotfl::rotfl::rotfl::rotfl::rotfl::rotfl::rotfl::rotfl::rotfl::rotfl::rotfl:

atush

What is important to remember is, if you buy today, your money will be worth more than inflation in a year's time (0.25% in fact).
5%? 3%? Whatever. The point is you won't lose money to inflation, whatever it turns out to be. You won't be running in quicksand as it were.


This is something no one else can say, as no one knows what RPI will be in a year's time.

lisyloo

On the other hand, the Bank of England has been predicting a fall in inflation for the past two years and has been consistently wrong

This is correct, but I'm not entirely basing my analysis on just BOE predictions.

The December 2011 inflation rate will compare with prices in Dec 2010 with 17.5% VAT.
The Jan 2012 inflation rate will compare with prices in Jan 2011 with 20% VAT.

There is a mathematical certainty that this will have an effect and I believe the estimate would be around 0.76%.
There are a lot of other things going on too, but that's probably the biggest single factor in about 6 months time.

I think it's entirely possible that RPI could be between 3% and 4% in 2012, but I don't see RPI falling really low, just lower than it is right now.

SteveSilva

On the NS&I site it talks about a 5 year scheme, so does that mean you get interest each year RPI + 0.5%? So say RPI stayed at 5% each year you could get 22% in total?

kidmugsy

Since it's compound interest and index-linking, you'd get approximately 30% in total.

wriggly

talexuser wrote: »

You mean if inflation is 0% 12 months after you open? maybe theoretically so, but as much chance as winning the euro lottery I would say

RPI was 0% or less for 9 months in 2009.

(Due to the way the bonds work during deflation, people who bought before 2009 and held till at least 2010 were actually better off than if inflation had kept rising uniformly.)

Sceptic001

wriggly wrote: »

RPI was 0% or less for 9 months in 2009.

Yes, mainly due to the collapse in base rates from 5% to 0.5%, which had a massive impact on mortgage interest payments (which are included in the Retail Prices Index, but not Consumer Prices Index). Not a circumstance that can be repeated in the foreseeable future!

wriggly wrote: »

(Due to the way the bonds work during deflation, people who bought before 2009 and held till at least 2010 were actually better off than if inflation had kept rising uniformly.)

True, but other savings products at that time were paying considerably better rates...