No Index-linked Savings Certificates this year

SallyG

From the Telegraph:
"National Savings & Investments has confirmed that it is "highly unlikely" its popular Inflation-linked Savings Certificates will be returning to the market this year.
Gill Stephens from NS&I said that the Government's "Net Financing Target" for 2012/13 was too low to offer the product. NS&I is not run on sales targets like ordinary banks and building societies, but instead is set an annual Net Financing Target by the Treasury which governs how much money it raises each year.
The Net Financing Target is based on a balance of the interests of savers, the wider financial services industry and taxpayers.
"Last year our Net Financing Target was £2 billion – which meant we could put Index-linked Savings Certificates back on sale," said Ms Stephens. "Given our 2012/13 target is to deliver £0 Net Financing, we do not expect to be able to reintroduce Index-linked Savings Certificates in the coming financial year." "

Mr_K

Shame, but maybe not a great loss since inflation is supposedly heading down (despite today's jump in rates).

StevieJ

Mr_K wrote: »

Shame, but maybe not a great loss since inflation is supposedly heading down (despite today's jump in rates).

Or maybe they know something that you don't, or maybe that budget deficit has miraculously disappeared

RobStaffs

Dont think inflation will remain on a downward trend in 2013

lisyloo

Dont think inflation will remain on a downward trend in 2013

Care to share the analysis behind your opinion?

kidmugsy

Will we still be able to roll over maturing certificates?

LesU

Dont think inflation will remain on a downward trend in 2013

lisyloo wrote: »

Care to share the analysis behind your opinion?

I tend to agree with the first statement. Here are some starters.
Aside from the 'downward trend' being heavily influenced by VAT dropping out of the picture, I think the rates will be affected by the following.
Fuel costs are guaranteed to rise courtesy of the Government, never mind world prices due to political instability.
Ditto cigarettes, drink etc
The drought is going to affect price of anything that is grown in this and some other countries. It is alarming to hear the number of farmers that are opting this year for 'drought-tolerant' oil seed rape (used for the 'green' part of our vehicle fuel) as opposed to anything edible or drinkable (beer is going to rise- not enough barley).
I think that retail will rise during the Olympics to get as much from foreign tourists as possible, though this may fall again after.
We all know about PO stamps of course.
I'm also not sure just how long the supermarkets can keep up their cost cutting war, being waged at the moment.
As the Eurozone becomes more unstable the pound may rise as investors turn to the least worst option and invest in Sterling ( already starting to happen). This will make our imports more costly.

These are just a few thoughts that occur to me at present. I'm sure I can come up with some others.

Commodities and services that will rise by less than 3% p.a. are more difficult to find. Electric and Gas I don't think will rise, but they won't fall, especially after the summer.
I think there may be a chance of a continued downward trend in RPI/CPI, but only a few points of a percentage in a year's time. Say, 3 to 3.3%. Certainly not 2%.

RobStaffs

lisyloo wrote: »

Care to share the analysis behind your opinion?

To be honest I dont have an analysis.I am not an economist.I tend to take the lead from various commentators and also the news.Only today it is being reported that inflation will not drop below 3% well into next year.Also the quantative easing thingy.How will this eventually impact ? This coupled with the 3ppl fuel increase and what seems to be a never ending shopping costs... Have last years fuel increase impact yet?Also at some point the economy is going to grow.How is this going to be stimulated?

lisyloo

I tend to agree with both of you.
I think the biggy is the price of fuel, which affects pretty much everything.
So far fuel increases have been largely absorbed by businesses and retailers but how long can that go on? Surely there comes a point where once all the absorbtion is maxed then fuel increases have to be passed on directly on top of goods.

How is this going to be stimulated?

Businesses are keeping cash and some householders are paying down debt e.g. those on mega low interest rates. At some point there will be enough confidence to start spending/investing again.

SallyG

http://www.moneymarketing.co.uk/adviser-news/chris-gilchrist-treasury-short-term-madness/1050855.article

Explanation of the no-show.

"You might be suspicious about the justification of that “no new money” target. Rightly so. The banks crawling out of their self-inflicted debt morass need to be able to increase the proportion of their loans funded by deposits rather than wholesale funds. They do not need competition from NS&I. So, with a wave of the Treasury wand, they are not getting the competition. But is the Treasury right to sacrifice the needs of individual savers to the needs of banks because the public at large effectively own one and a half of the biggest ones?

That could be seen as short-termism gone mad. In fact, it is worse than that. In NS&I, the Government has one of the very few totally trusted and reliable names in the savings industry. If there is one institution capable of creating a long-term savings product that people would buy, it is NS&I. Indeed, it has already blueprinted exactly the product that I predict would be a runaway success and help to restore the nation’s long-term savings habit - a 10-year contractual savings plan with payouts linked to inflation and bonuses on top."

Time for a campaign MSE?

kidmugsy

I thought that the last issue of ILSCs were offered on preposterously generous terms and so "filled my boots". No wonder they're not on sale this year.

People chatter away about money as if they've not understood the terrible mess that Mr Brown plunged us into.