Calculating NS Index linked saving certificate values

cepheus

Has anyone actually managed to do this exactly based on the original investment amount, date, the RPI values at start and current, and indexing amount?

Yes I know there is a calculator, but I can't reproduce the figures.

I can get it correct to within about 1% but that's all.

Some background info here based on an old certificate

How do the Certificates work?
Index-linked Savings Certificates are lump sum investments, designed to be held for fixed terms. Returns on the certificates are added on each purchase anniversary, rather than monthly or at the end of the three or five-year investment term.

The Certificates pay a fixed rate of interest (currently 1pc AER) on top of the rate of inflation. As the fixed interest rate increases year on year, a three or a five-year certificate must be held for the full term in order to gain the full fixed rate of interest. So, for example, the current three-year certificate offers a 1pc AER fixed rate of interest, but this is paid out at 0.85pc on the first purchase anniversary, 0.95pc on the second anniversary and 1.21pc on the third.
The separate, variable part of the return, linked to inflation, is known as index-linking. We work out index-linking by using the RPI figures applicable at the start and end of each year of an investment, not the monthly changes in between. If the index-linking is positive, we add it on each anniversary of your investment. If it is not – as we have seen recently – the interest is added but no adjustment is made for a negative RPI.

http://www.telegraph.co.uk/finance/personalfinance/savings/7448715/NSandI-Index-Linked-Savings-QandA.html

lisyloo

No.
I use the calculator for some and the on-line system for more recent ones.

Can you tell us how you've calculated this and then we might be able to comment.
Are you adding the interest annually?
Where are you getting the RPI figures for the exact annivesary days?
I am assuming they use RPI on the anniverary and do it annually.

cepheus

I've tried it ten different ways, some added annual anniversery only, some added monthly, some added with just the RPI part or additional part, some with the RPI month I took out the certificate, some the month before, some the month after. Nothing works! More baffling there is no consistency in errors between similar certificates taken out at the same time!

In general I lose out a bit, but of course NSI say their own calculator isn't accurate anyway so perhaps my calculation is better. I'm taking RPI from here which seems to be updated. more regularily than most sources

simple question, if it's calculated at the anniversary only, why does their calculation change every month?

alanq

Does the NS&I calculator tell you what you would get if you cash in now? If so that takes account of any early closure penalties rather than telling you how well a certificate you intend to hold until maturity is performing.

veryintrigued

Are we sure the calc is correct currently?

https://forums.moneysavingexpert.com/discussion/4818555

cepheus

veryintrigued wrote: »

Are we sure the calc is correct currently?

https://forums.moneysavingexpert.com/discussion/4818555

Didn't see that thread. It seems they are having the same problem. I noticed a significant drop in values this month as well.

cepheus

alanq wrote: »

Does the NS&I calculator tell you what you would get if you cash in now? If so that takes account of any early closure penalties rather than telling you how well a certificate you intend to hold until maturity is performing.

I forgot about that new rule.

Financial changes

penalty and loss of index-linking for cashing in early
The penalty is equivalent to 90 days’ interest on the amount cashed in. And you’ll lose the index-linking on your whole Certificate for the investment year in which you cash in.......The changes will only affect you if your Certificate matures on or after 20 September 2012, and you choose to renew it for a further term.

I'll have another look after allowing for this.

talexuser

The calculator is still not right, my value has gone down again from a few days ago. Pretty disgusting when the institution you are saving with can't even get the calculation correct, particularly since they promised to fix it 10 days ago "within a few days" and still have not done. Maybe an email to our MPs might get them off their a***s?

Lansdowne

The RPI for prices in December (used by NS&I during February) was 253.4
The RPI for prices in January (used by NS&I during March) was 252.6

http://www.ons.gov.uk/ons/rel/cpi/consumer-price-indices/january-2014/stb---consumer-price-indices---january-2014.html#tab-Retail-Prices-Index--RPI--and-RPIJ-

Therefore you should expect that the value of a certificate is lower in March than in February.

talexuser

In March it went down, then went up a couple of days later, then went down again, all for the same date!

lisyloo

simple question, if it's calculated at the anniversary only, why does their calculation change every month?

This is complete guesswork.
But my guess is that when the calculate for paying they do it on annual RPI from anniversary date.
The monthly calculations are provided for info only and are not accurate.

Obviously if someone cashed in part way through a year then they must have some way of doing it.