Ns&i

masonic

bigfreddiel wrote: »

This month the nsandi calculator seems wrong to me

http://www.nsandi.com/savings-index-linked-savings-certificates?tabid=h

for example my £15k 3yr ilsc taken out on 25th may 2010 only gained £13, previous months its been an average of £40-£60 - anyone else noticed?

Maybe because RPI hasn't changed at all this month so you are only getting the additional 'interest' component?

bigfreddiel

masonic wrote: »

Maybe because RPI hasn't changed at all this month so you are only getting the additional 'interest' component?

good point

lisyloo

Yes I did notice, but the 5% published figure is annual and the increase is only last month when it hasn't gone up much.
Personally I expect RPI to go down, but for me they are still a good buy after ISAs are full.

Layo909

Still trying to work out which is best, cash ISA or ILSC.

The calculator in the following link says that annual interest earned from £3000 at 3.3% is £99: http://www.creditchoices.co.uk/savings-calculator.html

However, NS&I calculator says that, over 2 years, interest earned from £3000 will be £380: http://www.nsandi.com/savings-index-linked-savings-certificates?tabid=h

Am I doing something wrong perhaps? Or is ILSC the one to go for?

xrjtg

Layo909 wrote: »

Still trying to work out which is best, cash ISA or ILSC.

The calculator in the following link says that annual interest earned from £3000 at 3.3% is £99: http://www.creditchoices.co.uk/savings-calculator.html

However, NS&I calculator says that, over 2 years, interest earned from £3000 will be £380: http://www.nsandi.com/savings-index-linked-savings-certificates?tabid=h

Am I doing something wrong perhaps? Or is ILSC the one to go for?

You won't know what the return from an ILSC will be until you cash it in, as it depends on price changes over the time you hold the certificate.

xrjtg wrote: »

Very, very crudely: when you take out an ILSC for £100, the government goes and buys half a ton of potatoes. 5 years from now the price of potatoes has gone up, so they sell your potatoes, then they add about 2.5% and give you back the cash.

The main differences with the real system are that they don't actually buy the potatoes, and they look at a wider range of goods and services (rather than just the price of potatoes) that more accurately reflect the reduced value of the cash that you lent them.

lisyloo

The calculator in the following link says that annual interest earned from £3000 at 3.3% is £99: http://www.creditchoices.co.uk/savings-calculator.html

That's over one year.

However, NS&I calculator says that, over 2 years, interest earned from £3000 will be £380: http://www.nsandi.com/savings-index-...icates?tabid=h

That's 2 years and also assuming a certain RPI.
My view (and most economists) is that RPI will go down from here so that's probably too high, but it's important to realise we don't know what it will be.

Am I doing something wrong perhaps?

Not taking into account the time period and making an assumption on NSI.
No-one can tell you which will be higher.
Over I year I think NSI will be higher than 3.3% but I could be wrong.

Oh and remember the ISA allowance is for the rest of your life so very valuable.

Layo909

lisyloo wrote: »

That's over one year.

That's 2 years and also assuming a certain RPI.
My view (and most economists) is that RPI will go down from here so that's probably too high, but it's important to realise we don't know what it will be.

Not taking into account the time period and making an assumption on NSI.
No-one can tell you which will be higher.
Over I year I think NSI will be higher than 3.3% but I could be wrong.

Oh and remember the ISA allowance is for the rest of your life so very valuable.

Thanks for advice. I was aware of difference in time periods but to me £99 (Santander ISA) vs £190 (ILSC) annual savings income is a big difference.

lisyloo

£190 per year is 6.33%.
I don't know how you did the calc but current certificates are NOT paying this.
Were you looking at past figures?
How did you do the calc?

Concensus forecasts for RPI are
2011 - 5.2%
2012 - 3.4%

If you were looking at past RPI then you can NOT rely on this to be paid in future.
I don't know exactly what calcs you are doing but they are not a reliable guide to what is going to happen in future.
You need to take a "view" on future RPI as none of us know what it's going to be.
I know that forecasts are often incorrect but the thing I sue are concensus forecasts as it's the best I have to go on.

Layo909

lisyloo wrote: »

£190 per year is 6.33%.
I don't know how you did the calc but current certificates are NOT paying this.
Were you looking at past figures?
How did you do the calc?

Concensus forecasts for RPI are
2011 - 5.2%
2012 - 3.4%

If you were looking at past RPI then you can NOT rely on this to be paid in future.
I don't know exactly what calcs you are doing but they are not a reliable guide to what is going to happen in future.
You need to take a "view" on future RPI as none of us know what it's going to be.
I know that forecasts are often incorrect but the thing I sue are concensus forecasts as it's the best I have to go on.

Sorry yes, this was on basis on ILSC purchased for 2 years in July 2009.

Where did you find the concensus forecasts? These still suggest that the ILSC just edges it.

lisyloo

http://www.hm-treasury.gov.uk/d/201106forecomp.pdf

RPI forecasts are on page 4.
Sorry I misquoted slightly - 2012 number is 3.5% (or perhaps I'm remembering a less recent version).

Sorry yes, this was on basis on ILSC purchased for 2 years in July 2009.

I don't think that's a sound guide to the future for two reasons.
Firstly RPI will probably be lower. No one can say for sure but there will definitely be a VAT effect in Jan 2012.
Currently VAT prices of 20% are being compared with old prices of 17.5% giving an uplift which will drop out - this is a certainty (about 0.76% of RPI??).
The second reason why it's not accurate is that last year the offering was RPI + 0.85% in the first year, now it's RPI + 0.25%, so the extra increment has dropped i.e. the offering is not quite as good.

Also bear in mind that in a year interest rates may well rise so variable rate ISAs may well go up.

Really difficult to call to be honest. On balance I think the ISA might be safer i.e. less variability.
RPI could vary, we jsut don't know.
World events e.g. price of oil, coren etc. all affect it, so it's not as preditable as ISA rates which will probably stay the same until base rates rise.

It really depends on your goals.
One of the benefits of NSI is that you're money is guaranteed to go up in real terms.
The ISA may pay more or less but there is no guarantee wrt inflation, so it really depends whether that's a concern of not.