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

masonic

AnotherJoe wrote: »

Well that's a fair point,I suppose they have to cover themselves in case RPI is replaced.
But note that CPI has not replaced RPI it's an additional index. So it's not the same as them saying that they reserve the right to switch you to CPI..

CPI has not replaced RPI, nor has RPIJ or any other index. That's why the certs still use RPI. That does not mean RPI won't be replaced in the future.

What constitutes RPI being "replaced" is an interesting question. If you search around a bit, you'll find a post from polymaff stating that the Head of NS&I confirmed that it is within NS&I's power to change from RPI to another index during a MoneyBox interview.

So for the point under discussion, 3 year or 5 year, should at say year 3 RPI be replaced by an index you don't like, if you have a 5 year certificate you can still bail out at the 3 year point and you'd be in the same position as if you'd got a 3 year certificate that was expiring.

Agreed, at current rates you'll be essentially in the same position if the index changes within 3 years. But if it isn't replaced, then you'll be locked in the current interest rate, which is historically low, for longer.

polymaff

AnotherJoe wrote: »

Well that's a fair point,I suppose they have to cover themselves in case RPI is replaced. But note that CPI has not replaced RPI it's an additional index..

It has done exactly that for most other governmental, indexed, computations - e.g. benefits.

You're not making a case based upon evidence, Joe.

Mr_K

No guarantees, but if they do change to CPI it will be it's likely to be for renewals only. Reason being went they made changes the t&c's on withdrawal penalties, it was for renewed certs only. i.e. they tend only to introduce changes when certs are renewed.

Going to roll mine over for 5 years. Mainly because I haven't got anywhere better to put the money, withdrawal penalties are small and RPI is forecast to go up over the next few years.

http://www.statista.com/statistics/374890/retail-price-index-rpi-forecast-united-kingdom-uk/

AnotherJoe

polymaff wrote: »

It has done exactly that for most other governmental, indexed, computations - e.g. benefits.

You're not making a case based upon evidence, Joe.

Well the evidence is that there is currently RPI and CPI and the government are creating a 5 yearr certificate that states that it will use RPI, not CPI.

If they wanted to use CPI now woudl be the time to do it, at renewal (or at a future renewal).

To change it mid-stream would leave them open to all sorts of legal challenges.If they wanted to change it now would be the perfect time. Next time would be when the 3 years expire. NOt after several million [STRIKE]voters[/STRIKE] savers have signed up to RPI.

In any case, getting back to the matter at hand, so what. Lets say its a cunning plan to trick everyone and !!!! off the pensioner vote. If they change it going forward at say 2 years in and you dont like it you can withdraw without loss since you are not really locked in. 90 days loss of 0.1 % isnt really much of a penalty is it ?

Rollinghome

masonic wrote: »

What constitutes RPI being "replaced" is an interesting question. If you search around a bit, you'll find a post from polymaff stating that the Head of NS&I confirmed that it is within NS&I's power to change from RPI to another index during a MoneyBox interview.

On the whole I'd assume that any government, or NS&I, would prefer not to go there. The opinion that would matter would be that of the courts and not the head of NS&I.

There's already been a High Court case touching on the subject:
'The judge (Mr Justice Warren) rejected the second interpretation. The scheme rules only allowed the Trustees to adopt a different index once RPI has been "replaced". He found that there could only be a "replacement" of RPI once it had ceased to be published. The fact that it is no longer recognised as a national index does not amount to "replacement".'

So if the RPI ceased to exist then there would have to be a replacement but there's room for a lot of quarrelling over what could be considered a replacement. Seems unlikely that the CPI could ever be considered as such when it had already existed alongside the RPI when the certificates were issued and would be detrimental to the interests of holders.

littly_kitty

AnotherJoe wrote: »

There is a clear difference.
[...]
I'd say the downside is far higher than the upside because it makes no sense that they would offer extra incentives at 3 year mark yet not be selling new certificates at that point. If they need to offer extra incentives to increase renewal rates they will need to sell more and this means not limiting it to the pool of 3 year holders.

This is the realisation I've come to and why I'm letting mine auto renew for 5.

If I went for the 5 year option and then they offered a fabulous rate at 3 years, I guess I could always cancel early and apply for the 3 year bond. Is that correct or would they have a rule preventing me from doing so.

Thanks!

ColdIron

littly_kitty wrote: »

If I went for the 5 year option and then they offered a fabulous rate at 3 years, I guess I could always cancel early and apply for the 3 year bond. Is that correct or would they have a rule preventing me from doing so.

This product has been removed from sale, if you cashed in early and removed your money you wouldn't be able to rollover or buy back in. The chances of a fabulous rate are optimistic

littly_kitty

ColdIron wrote: »

The chances of a fabulous rate are optimistic

Out of interest, what are you basing the "optimistic" on? I'm not saying that you are right or wrong and I am not trying to disagree or agree, I'm just curious. Thanks!

ColdIron

Seven years of persistently low rates and remember this linker was only 0.5% 5 years ago. Low interest rates are the new normal

dqnet

@AnotherJoe, if you remember I mentioned it all depends on your personal circumstances. Yes, you could cash out at the start of the 4th year but that's just the same as renewing in the 4th year for a further 3 year one. NS&I have told me in not so many words that this product will not be removed for those who already own them. As others have said, its optimistic for the rates to go up by that much and you may be able to do more with 15k (or whatever) somewere else.