Cash in ns&i index linked bonds?

brian_723

Can I ring up after the year and find out what my certificate is worth ?

heather8

You can go to the NSI website and there is an interest calculator that will tell you what your investment is worth.

This link should take you to the right place. http://www.nsandi.com/savings-index-linked-savings-certificates?tabid=c

I keep a track of mine every month and this month my investment has dropped, as I invested in May too. Myself, DH and DS all have a holding. I can get a better return for my son outside of NSI as he doesn't pay tax. I will wait until they are a year old to cash them in and move.

pqrdef

brian_723 wrote: »

Can I ring up after the year and find out what my certificate is worth ?

It's worth pretty much the same as when you bought it. That's kind of the point of index-linking.

Masomnia

pqrdef wrote: »

It's worth pretty much the same as when you bought it. That's kind of the point of index-linking.

Not in nominal terms, smarty pants.

noh

phred wrote: »

Thanks for your reply.
I had a look a NS&I website and it looks like only completed periods of three months count after the anniversary date.

See following extract from their terms and conditions.

On an anniversary date

We’ll pay you the anniversary value for that year, which will include the fixed interest at the rate that applies for that year.
Between anniversary dates

We’ll pay you the most recent anniversary value plus any fixed interest for each complete period of three months since then.

Those are the terms for Fixed Interest Savings Certs.
http://www.nsandi.com/savings-fixed-interest-savings-certificates?tabid=c


Index linked certificates pay complete months after the first anniversary. See the Terms and conditions here.http://www.nsandi.com/savings-index-linked-savings-certificates

"63. The amount due when cashing in a Certificate which has been held for at least one complete month from an anniversary date will be the anniversary value on that anniversary date plus:

• (a) any positive index-linking for each complete month from that anniversary date to the date of repayment; and
• (b) 1/12th of the annual interest for each complete month held from that anniversary date."

capehorn

Thanks to the previous posters for their explanations of how the bonds increase in nominal terms.

I remember reading somewhere that they take the inflation figures from two months before you invest to work out their value after the first year is up. I thought that means that if you invested in June 2011, they would take April 2011-April 2012's inflation figures to work out your bond's value after the first year and ended. Is that right?

[I've just looked at the terms and I must have got it from this clause:]

14. For the purposes of these terms and conditions, the RPI figure applicable to any calendar month will be the RPI figure published in the immediately preceding month. For example if you invest in March, we would use the RPI figure for January (published by the Office for National Statistics part way through February) as your RPI start level.

The reason I am asking is because I invested £5000 on 30/6/11 and according to the calculator, after February's figures, it is now worth £5086.00. I would have thought after six months of RPI between 4-5.5% (and eight months if what I thought about the two month countback was correct), then it would be worth at least £5100 and probably more. Clearly I have misunderstood how this works, what have I got wrong?

Sceptic001

capehorn wrote: »

Thanks to the previous posters for their explanations of how the bonds increase in nominal terms.

I remember reading somewhere that they take the inflation figures from two months before you invest to work out their value after the first year is up. I thought that means that if you invested in June 2011, they would take April 2011-April 2012's inflation figures to work out your bond's value after the first year and ended. Is that right?

[I've just looked at the terms and I must have got it from this clause:] The reason I am asking is because I invested £5000 on 30/6/11 and according to the calculator, after February's figures, it is now worth £5086.00. I would have thought after six months of RPI between 4-5.5% (and eight months if what I thought about the two month countback was correct), then it would be worth at least £5100 and probably more. Clearly I have misunderstood how this works, what have I got wrong?

The notional value (including index-linking) is calculated by working out the change in RPI since purchase. The RPI used for June 2011 purchases is 234.4. The RPI published today is 238.0

238/234.4 * 5000 = £5076.79. The extra £9 in your quote from NS&I is presumably the fixed element.

Of course the actual value is still £5000 until the first anniversary. Then you will get the quoted RPI inflation rate plus the fixed element.

Interestingly, the RPI figure published last month was higher (239.4) than the figure published today (238.0), so prices actually fell in January. The consequence of this for anybody intending to cash in certificates shortly (assuming of course that they are past the first anniversary) is that they will get more if the withdrawal application is submitted before the end of February (using 239.4) than if they wait until March (using 238.0).

Example: £100 of Certificates bought in January 2011 (RPI 226.8)
Cashed in February 2012 yield
239.4/226.8 * 100 = £105.55 (plus fixed element)
Cashed in March 2012 yield
238/226.8 * 100 = £104.94 (plus fixed element)

Johnny_Doe

dunstonh wrote: »

You buy NS&I index linked certificates (not bonds) to give you a hedge against inflation. Savings rates rarely keep up with inflation over the long term (you get periods above and below but average out to below). So, the certs can still be very good value. Plus, they are tax free.

Dunston are you sure about this? Had a quick google at historic inflation rates vs historic interest rates and interest rates seem to be higher on average? It's only recently they have performed badly..

Resources:

http://www.bankofengland.co.uk/mfsd/iadb/Repo.asp (apologies only goes up to 2009)

http://www.rateinflation.com/inflation-rate/uk-historical-inflation-rate.php?form=ukir and I realise this is CPI not RPI..

And most savings accounts I have are way above the BOE interest rate, i.e its 0.5% now and I get 4% or 3.2% tax free...(monmouthshire).

dunstonh

Dunston are you sure about this? Had a quick google at historic inflation rates vs historic interest rates and interest rates seem to be higher on average? It's only recently they have performed badly..

Savings rates dont always pay more than base rate. Especially when the base rate is higher. Then deduct tax.

And most savings accounts I have are way above the BOE interest rate, i.e its 0.5% now and I get 4% or 3.2% tax free...(monmouthshire).

but lower than inflation.

Masomnia

capehorn wrote: »

Thanks to the previous posters for their explanations of how the bonds increase in nominal terms.

I remember reading somewhere that they take the inflation figures from two months before you invest to work out their value after the first year is up. I thought that means that if you invested in June 2011, they would take April 2011-April 2012's inflation figures to work out your bond's value after the first year and ended. Is that right?

[I've just looked at the terms and I must have got it from this clause:] The reason I am asking is because I invested £5000 on 30/6/11 and according to the calculator, after February's figures, it is now worth £5086.00. I would have thought after six months of RPI between 4-5.5% (and eight months if what I thought about the two month countback was correct), then it would be worth at least £5100 and probably more. Clearly I have misunderstood how this works, what have I got wrong?

Essentially the headline figures as quoted on the news are year on year. So are comparing January now, with January one year ago. So if you bought the certificates 6 months ago the figures on the news are pretty much irrelevant.