NS&I 5 year index linked saving certs 2011 issue - half way point!

Shedman

I am probably being dumb but as I thought RPI had increased (slightly) this month then the estimated value would have gone up a bit so how come there's a 0.6% reduction from last month?

masonic

Shedman wrote: »

I am probably being dumb but as I thought RPI had increased (slightly) this month then the estimated value would have gone up a bit so how come there's a 0.6% reduction from last month?

It has increased relative to the figure reported 12 months ago, but it has fallen relative to last month.

bowlhead99

masonic wrote: »

Shedman wrote: »

I am probably being dumb but as I thought RPI had increased (slightly) this month then the estimated value would have gone up a bit so how come there's a 0.6% reduction from last month?

It has increased relative to the figure reported 12 months ago, but it has fallen relative to last month.

The way to think of it is that the prices of buying a basket of 'stuff' in December cost £239.80, and in January the basket only cost £238.10. So things got cheaper (January sales, fuel price wars) and cost 0.7% less than they did last month, so if your interest rate is "inflation plus a little bit", you'll have seen the value fall and not rise.

The 'RPI increased slightly' which you'd heard, is talking about the annual change in prices not how much things cost today versus last month.

Back in December 2014 the basket cost £238.60, and the previous figure you'd heard was that the RPI for the year to December 2015 (when it cost £239.80) was half a percent, which was true. But in January 2015 the prices were also lower than the month before it (January sales again...) and meant the basket only cost £236.50. When you compare last January's £236.50 to this January's £238.10, you can see that prices rose 0.7% over the year.

So December to December was 0.5% and January to January was 0.7% which is why you heard that RPI (the rate of inflation from one year to the next) had gone up compared to what was reported last time they reported it.

But, the price of buying things in January 2016 was cheaper than buying things in December 2015, and so if you are going to get a payout from NS&I based on what things cost, they will project you are going to get less money based on January numbers than they would have projected on December numbers, because things don't cost as much in January as they did when they were projecting your payout last time.

Make sense?

polymaff

Shedman wrote: »

I am probably being dumb but as I thought RPI had increased (slightly) this month then the estimated value would have gone up a bit so how come there's a 0.6% reduction from last month?

In brief:

The 12-month rate is only relevant to the bond's valuation on each anniversary of the bond - so don't try to draw any conclusions about a May bond based upon a January figure.

That said, using the same algorithm that NS&I uses, the slight uplift in the 12-month rate has raised the final redemption estimate for a late-May 2011 fully funded 5yr ILSC to £17,226.

Shedman

Cheers for responses. Hadn't appreciated the downward movement Dec to Jan as was going on the headlines - should have looked at the ONS RPI table I suppose. Don't suppose I am the only one confused by the reduction though.

bowlhead99

Shedman wrote: »

Cheers for responses. Hadn't appreciated the downward movement Dec to Jan as was going on the headlines - should have looked at the ONS RPI table I suppose. Don't suppose I am the only one confused by the reduction though.

Yes, my numbers were from the ONS spreadsheet.

Effectively your product is based on what things cost compared to what they cost when you invested, so the one-year price changes are only really relevant if you can line them up in a row over the full three or five years.

Picking two other arbitrary dates like Jan to Jan or Feb to Feb or Dec to Dec and seeing if the changes in prices between those months are getting bigger or smaller, only has very limited usefulness, if you're trying to figure out what the May to May changes might be.

polymaff

bowlhead99 wrote: »

Yes, my numbers were from the ONS spreadsheet. .

A Garbage In / Garbage Out database, dressed up as a spreadsheet, actually.

bowlhead99

polymaff wrote: »

A Garbage In / Garbage Out database, dressed up as a spreadsheet, actually.

Well, if you buy a product based on the numbers which are going to appear in a published spreadsheet, you can't really complain if you don't like the way that the data is collected or what weightings are used to build the spreadsheet - both of which are published and neither of which have changed materially for the worse since you last renewed the product.

ONS do publish interactive versions of the spreadsheet data and allow you to select your own weightings to come up with a personalised inflation measure, but good luck getting a bank to pay you an interest rate based on that.
:beer:

polymaff

bowlhead99 wrote: »

Well, if you buy a product based on the numbers which are going to appear in a published spreadsheet, you can't really complain if you don't like the way that the data is collected or what weightings are used to build the spreadsheet - both of which are published and neither of which have changed materially for the worse since you last renewed the product.

ONS do publish interactive versions of the spreadsheet data and allow you to select your own weightings to come up with a personalised inflation measure, but good luck getting a bank to pay you an interest rate based on that.
:beer:

Apologies - I mis-read ONS as NSI.

10_66

I have a 5 year Index Linked Saving Certificate that's due to mature in May this year. I've not had one of these before so not familiar with them. If I choose to re-invest it do I still receive an interest payment or is the earned interest rolled over into the next certificate?