Got my NS&I index-linked statement

guitarman001

I got somewhere in the region of 1% (roughly). If I had a better place to move the money to, I probably would. Anybody else had their statements lately?

kidmugsy

guitarman001 wrote: »

If I had a better place to move the money to, I probably would.

Would the better place offer uncapped insurance vs an increase in inflation rate?

lisyloo

Have you thought about moving the money to stock and shares?
Or putting it into a pension. You might get a 40% uplift or more (we get NI relief as well as income tax relief via salary sacrifice).

Of course with shares you take some risk. Ours went down a few Ks recently because of the Greek debacle.
Pensions we can't take til 55.

So all depends on your requirements.

What are you looking for in terms of liquidity? risk? etc.
Otherwise no-one can tell you what's best because it's relative to what risk you're willing to take and how long you can tie it up for.

Certainly pensions are worth looknig at if your a higher rate tax payer and don't need the money.

polymaff

guitarman001 wrote: »

I got somewhere in the region of 1% (roughly). If I had a better place to move the money to, I probably would. Anybody else had their statements lately?

Yes, depressing, isn't it? I'd have thought that the annualised RPI will rise, though, so unless NS&I and/or the government do something despicable the annual statements will look better next year.

I hope

masonic

polymaff wrote: »

Yes, depressing, isn't it? I'd have thought that the annualised RPI will rise, though, so unless NS&I and/or the government do something despicable the annual statements will look better next year.

I can't get depressed about low inflation. My linkers account for a little under half my cash savings and being in my final year I'm getting a real return of 0.86% this year. Meanwhile, the rest of my cash is earning a higher net real return than I've managed to get for quite some time.

polymaff

masonic wrote: »

... being in my final year I'm getting a real return of 0.86% this year. Meanwhile, the rest of my cash is earning a higher net real return than I've managed to get for quite some time.

I had statements on recent ILCs, recently. In one case, with over £18,000 invested, the interest contribution for the year was less than £10. The linking rate was 0.89%. That in a year when nett interest rates on my bank and building society savings were, on average, 2.5%, after tax.

You've got to be on quite strong medication not to be depressed by that

Ballard

polymaff wrote: »

I had statements on recent ILCs, recently. In one case, with over £18,000 invested, the interest contribution for the year was less than £10. The linking rate was 0.89%. That in a year when nett interest rates on my bank and building society savings were, on average, 2.5%, after tax.

You've got to be on quite strong medication not to be depressed by that

Unless I'm not yet awake enough to calculate that's 0.055%

polymaff

Ballard wrote: »

Unless I'm not yet awake enough to calculate that's 0.055%

You are wide awake - the coupon on ILCs now being 0.05%.

masonic

polymaff wrote: »

I had statements on recent ILCs, recently. In one case, with over £18,000 invested, the interest contribution for the year was less than £10. The linking rate was 0.89%. That in a year when nett interest rates on my bank and building society savings were, on average, 2.5%, after tax.

So your net real return was 0.05%. You knew that would be the case in advance. I don't think I'd have taken out certs on those terms, but you did, so presumably you were happy to receive 0.05% real at the time. The actual amount added for index linking is irrelevant if you are considering the real rate of return. We could have double digit inflation and presumably that would make you happy because you'd see your certs grow by several thousand pounds per year in nominal terms, but you'd be no better off, as the spending power of your money would be shrinking at a similar rate.

But perhaps the source of your depression is the fact that you could have pulled the money out of the certs in late 2014 and saved it in high interest current accounts instead? If you could maintain that average rate after adding £18k, then you'd have earned 1.6% real on the money instead of 0.05%.

However, your source of remorse in that case should be that you didn't pull your money out rather than wishing inflation had been higher. If you wish inflation higher, then it will negatively impact the real rate of return on your non-ILSC savings. Say RPI was at about 4% (which it was in the recent past). You'd still be getting that 0.05% real rate of return on your certs, but your savings would be shrinking in value by 1.5% in real terms. 0.05% on the certs plus 1.6% on the savings beats 0.05% on the certs and -1.5% on the savings in my book. Of course, perhaps in a higher inflation environment the base rate would have been lifted by 0.25 or 0.5% by now, but I doubt that is going to have any material effect on the most popular accounts people are using to save their cash at the moment.

Unless your personal rate of inflation is completely detached from RPI, such that your spending wouldn't rise if RPI inflation was higher, then I really can't see any reason at all to wish for higher RPI inflation.

You've got to be on quite strong medication not to be depressed by that

If you are not preoccupied by the nominal value of your savings it's actually quite predictable and not at all depressing.

bigadaj

Depending on your view linkers either offer guaranteed return in real terms or a poor return currently in subjective terms.

Currently don't hold any but that's primarily because they aren't on sale currently, it would be interested to see what they would currently be offered at, presumably a negative interest rate would be possible. In which case you would have thought new issues would be attractive to the government, unless they foresee inflation taking off, though they can borrow at incredibly cheap rates in any case, so a slight reduction from those isn't worth it for the extra risk.

polymaff

masonic wrote: »

So your net real return was 0.05% ..... .

An interesting analysis, flawed, I suggest, by assumptions, Masonic. Your main assumption, in your first sentence and then throughout, is that RPI reflects real inflation. I'd question this. Setting my own circumstances aside, consider someone spending £1,000 per month. 0.89% equates to 74p per month. It'd be interesting to know how many have seen the prices they pay for food, energy, council tax etc. nett out at only 74p per month more than 12 months ago.

We may have a different interpretation of a "smiley". I interpret it as an indication that one is saying something with one's tongue firmly jammed into one's cheek.

Savers have had it rough for some years now - and I suspect that we all push to the back of our minds how much return we are getting compared to, say, eight years ago. I know that I do. What brick-through-the-window-like disturbs that revery is a letter telling me that my "Renewed Investment" of £18,778.72 made last June yielded a year later "Interest Capitalisation" of £9.39.

One has to take the rough with the rough