NS&I index linked saving certificates.

Chris75

veryintrigued wrote: »

0.75% reduction on the valuation of mine (2011 version) from last month to this.

http://www.nsandi.com/ilsc-calculator

The calculator assumes that todays inflation rate continues for the remainder of the life of your bond. As todays RPI is lower than yesterdays it works on a lower multiplier for the remaining life of the bond hence the lower value. The figure that it gives is actually pretty useless unless you are very near maturity.

veryintrigued

Chris75 wrote: »

The calculator assumes that todays inflation rate continues for the remainder of the life of your bond. As todays RPI is lower than yesterdays it works on a lower multiplier for the remaining life of the bond hence the lower value. The figure that it gives is actually pretty useless unless you are very near maturity.

You're suggesting ignoring any statement or snapshot of any variable saving/investment throughout its life until its 'near maturity'?

lisyloo

The figure that it gives is actually pretty useless

I like to know how much of got of what to balance my portfolio.
Accept your point that it's not accurate, but I'd prefer to have it than not.

Chris75

veryintrigued wrote: »

You're suggesting ignoring any statement or snapshot of any variable saving/investment throughout its life until its 'near maturity'?

If you regard the basis on which it is computed to be a reliable indicator of the future then no but if you think that RPI inflation is likely to change in the remaining life of the bond then you cannot rely on it. Up to you really.


Personally I am always very wary of a projection that assumes that the current situation will continue particularily when something one off has changed to influence the present position. Oil prices are not, for example, going to continue to fall much further (if at all) and the fall that we have had so far is already built into the figures. In 12 months time that fall will come out of the rpi figure and if nothing else has changed (very unlikely) inflation will go back to where it was before the oil price change. If oil prices were to go up it would add to inflation and your projected return would increase. So many variables, so little certainty.


The margin for error reduces as the remaining period gets shorter.

Chris75

lisyloo wrote: »

...........I like to know how much of got of what to balance my portfolio..........

Sorry but I don't understand what you are saying.

lisyloo

You cannot rely on it - and thanks for explaining why, but if you want to know approximately what your asset balance is then in my view it's better than doing nothing at all.

Sorry but I don't understand what you are saying.

I keep records of how much I have in my pensions, how much in NS&I, how much in cash, how much in S&S etc.
I need that information in order to plan and make decisions.

How do you plan - for example what % should go into your pensions? and what into your emergency fund?
Surely you must have some record of what you have where?

alanq

apt wrote: »

The 90 day interest penalty only applies if you invested or renewed after 20 September 2012.

That's more recent than I thought so my reply above does not apply to Ballard's May 2011 edition.

With earlier versions there was no penalty as such but the interest rate additional to RPI started low and rose each year throughout the life of the certificate. So by cashing in before the final year one loses out on the highest rate which may otherwise have gone some way to offsetting the lower RPI increase.

Chris75

lisyloo wrote: »

.................. I keep records of how much I have in my pensions, how much in NS&I, how much in cash, how much in S&S etc.
I need that information in order to plan and make decisions.

How do you plan - for example what % should go into your pensions? and what into your emergency fund?
Surely you must have some record of what you have where?

Yes I keep records and yes I plan but I base my plan on what I have now and what I believe will happen in the future. Calculators that can be interpreted as showing the future are dangerous in the hands of the unwary. Remember that the thing with index linked bonds is that whatever they are worth in £'s they will notionally always be worth the same in terms of what they will buy. That is a degree of certainty that you will not find in much of the rest of your portfolio.


You may not remember but there was an enormous misselling scandal when mortgages were sold with endowment insurance policies and projections that they would pay off the mortgage with less cost than a simple repayment mortgage. The projections were wrong for millions of policy holders and they were left with a loss of £000's rather than the profit which the projection had told them they would get. Treat projections with great caution and the longer they are projecting for the greater degree of caution necessary.

lisyloo

I base my plan on what I have now and what I believe will happen in the future.

Of course.
I think the vast majority of investors would know that £10K in cash is not the same as £10K in stocks and shares and not the same as £10K in property.
This is exactly why I constantly review the balance because each has different risks and I neeed to balance that.

That is a degree of certainty that you will not find in much of the rest of your portfolio.

There's a high degree of certainty in property as providing a place to live, but yes I understand your point.

You may not remember but there was an enormous misselling scandal when mortgages were sold with endowment insurance policies

I certainly do. We won a case for mis-selling and got compensated.

Treat projections with great caution and the longer they are projecting for the greater degree of caution necessary.

Thank you. I do take your point.
However I would still rather have the projection along with the caveat rather than no projection at all.
I do know that my S&S could go down tomorrow - plummet even, however I do feel I'm best placed to make a decision with the best quantitative data available for the figures and then the rest is down to making a personal judgement.

Rollinghome

Kilmar wrote: »

So RPI is now a mere 1.1% + my 0.5% bonus. That's 1.6% current interest.

Time to cash them in and put the money into 65+ Granny Bonds paying 4% gross or 3.2% net.

Anyone got a better plan?

It reminds me of when Martin Lewis 5 years ago or so was telling us how amazing ILSCs were because RPI was 5.30% (or some such figure) and the return was sensational compared with the alternatives.

That was nonsense of course because the RPI figure he quoted related to the preceding year, as RPI always does, and the actual return would depend on unknown future inflation figures, not those of the past.

To that extent nothing has changed. The latest RPI for the past 12 months in itself tells us little about what is to come.