NSI Index Linked savings certificates

jamesallen

Keensaver wrote: »

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There are two key savings questions you always have to ask: are you beating inflation, and are you getting the best rate available for your circumstances?

As long as you are beating inflation, you are not "losing" money. You are maintaining the purchasing power of your cash.

In normal circumstances, with inflation around 2%/3%, most savings accounts will beat inflation. Because inflation is very high right now, and these certificates are tax free, they make sense. As someone else said, you'd have to have something like 7% from a normal account to get you the same return.

My advice is put all you can into these certificates, and take it out when inflation drops/the rate rises. You only have to lock for a year.

Inflation can be very hard to predict. Two key influences atm are the VAT rise, which will drop out of the figures in five months or so, and oil prices, which are pretty high due to the Mid-East crisis. Therefore it seems likely that inflation will fall over the coming year, but it is by no means guaranteed. The base rate will probably rise over the next twelve months (there are now several dissenting voices on the BoE council), making other accounts more lucrative.

The ideal situation would be that you save with these for a year, then, near the end of the period, inflation falls to 3/4% RPI, and the base rate rises to 1%. Hopefully we'll see some 6% savings bonds, or even inflation matching instant-access accounts, and you can put your cash elsewhere to start beating inflation.

talexuser

wriggly wrote: »

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

and the chances of repeating that in the next few years with base rates where they are going to be is about as much as winning the euro lottery!