Is it time to ditch NSI Indexed Linked

ETROL

If inflation has peaked last month and we can probably expect it to fall over the coming months, is now a good time to cash certificates in?

If not yet then when?

opinions4u

Well don't get too excitied. RPI is still 5.0%.

Tax free.

Guaranteed to outperform RPI.

Accessible in a crisis.

Interest rates generally remain low.

If you think now might be the time, where do you suggest putting the money instead?

If not yet then when?

When you can get a better return elsewhere after tax, providing the same features.

Sceptic001

ETROL wrote: »

If inflation has peaked last month and we can probably expect it to fall over the coming months, is now a good time to cash certificates in?

Only if you can find a tax-free account paying 5% plus with near-instant access...

ETROL wrote: »

If not yet then when?

When you can find a better account somewhere else...

cepheus

When returns get less than alternative accounts I suppose. Inflation will have to go down about 2-3% or interest rates 2-3% up before that happens!

Even then inflation linked accounts are the safest around, anything else is a gamble relative to inflation which is were your datum should be, not absolute interest rates.

ETROL

Yes that would seem correct on the face of it

The reason that I ask is due to the way that these certificates work is not that straight forward.

I can also point to the fact that this month i earned just £18 on a £15000 certificate.

This is a fall from an average of £80 per month

Sceptic001

ETROL wrote: »

I can also point to the fact that this month i earned just £18 on a £15000 certificate.

This is a fall from an average of £80 per month

That is what statisticians call a "blip".

Or if you are the Governor of the Bank of England, all those months you got £80 are the blips and £18 is the norm. :rotfl:

Masomnia

Depends when you bought them I guess.

If you've bought them this year then the current head headline figures are irrelevant anyway as they reflect the change between last October's price level and this one.

Masomnia

PS, bear in mind that comparisons between the inflation rate and currently available interest rates are pretty much pointless; inflation rates are backward looking, whereas interest rates are forward looking.

If you expect inflation to be high over the coming year, or want to protect against it then the certificates are great; if you think inflation will fall back, maybe not so much. Depends on what you think will happen.

twokcc

ETROL wrote: »

Yes that would seem correct on the face of it

The reason that I ask is due to the way that these certificates work is not that straight forward.

I can also point to the fact that this month i earned just £18 on a £15000 certificate.

This is a fall from an average of £80 per month

Have to remember that when inflation goes up you not only get interest for the current month at that rate but in addition an increase for all the other months in the term(back to start or annual anniversary date if more than a year into term). If monthly interest rate goes down you get the latest rate for that month but will lose some of the interest that has been calculated for the previous months.
I keep a moving average calculation for the last 3 months this will vary for no of months back to annual anniversary date but all showing between 6.7% to 7.5% return(tax free) for last months.

As others have said once this gets less than available elsewhere I will be looking in more detail to see if need to cash in. At moment they are not on sale so would need to think carefully before selling but could be that if a lot of people decide to sell they may be offered again with better terms. Its a pain but just need to keep an eye on them each month and to be ready to take action(although IMHO) I can't see anything in the market being better for next few years.

But I never saw bank rate of .5% coming so could be wrong

oldvicar

twokcc wrote: »

Have to remember that when inflation goes up you not only get interest for the current month at that rate but in addition an increase for all the other months in the term(back to start or annual anniversary date if more than a year into term). If monthly interest rate goes down you get the latest rate for that month but will lose some of the interest that has been calculated for the previous months.

This really isn't how they work at all, neither in the calculation nor the effective return

twokcc wrote: »

I keep a moving average calculation for the last 3 months this will vary for no of months back to annual anniversary date but all showing between 6.7% to 7.5% return(tax free) for last months.

As others have said once this gets less than available elsewhere I will be looking in more detail to see if need to cash in. .......... Its a pain but just need to keep an eye on them each month ......

You would be approximately 11 months too late in taking any action. RPI annual changes look back at what has happened, rates available elsewhere are looking forward.

twokcc

oldvicar wrote: »

This really isn't how they work at all, neither in the calculation nor the effective return

Didn't say it was the effective rate, just my way of monitoring rather than just looking at current monthly return in pound notes.

You would be approximately 11 months too late in taking any action. RPI annual changes look back at what has happened, rates available elsewhere are looking forward.

Don't see how you arrive at 11months to late all my investments more than a year old so can cash in at any one month. Appreciate you could be gettind say5% plus 11 months into schem and if a massive (12month of deflation this could be reduced to additional element only with no inflation element.

What would you propose 'old vicar'?