nsandi tax-free certificate vs hi-interest savings? which is better?

Sillychuckie

isofa wrote: »

It's index-linked, so it will change when the RPI rate changes.

Otherwise you could buy an issue say at 3.8% and if it didn't change for the entire issue and inflation rocketed to say 10%, the savings would badly perform against inflation - and the whole point of the savings certs is that they are inflation proof!

I don't know if they make the change immediately when RPI changes, but I assume it's almost immediate otherwise it wouldn't be allowed to carry the index-linked status.

That didn't really answer my question.
I assume RPI changes daily.. (although, very fractionally).
My question was how often they check what the RPI is and how often do they adjust.
If you say it is immediately after the RPI changes, then I guess I am asking, how often does the 'OFFICIAL' RPI rate get re-released?
They pay interest daily... but I highly doubt they readjust their figures of RPI daily.

Thanks

isofa

The official inflation rates are only calculated, released and published, monthly - so therefore I assume everything else is based on this monthly release.

Prices do fluctuate daily, but no RPI or CPI rate is altered on a daily basis, as 1000s of prices are compared to calculate inflation rates.

Inflation is a complex subject, so I'd recommend reading extracts from the following sites:

www.bankofengland.co.uk

www.statistics.gov.uk

www.statistics.gov.uk/cci/nugget.asp?id=19 (for specific RPI and CPI details)

http://news.bbc.co.uk/1/hi/business/6266733.stm

isofa

PS I forgot this one:

https://www.statistics.gov.uk/cci/nugget.asp?id=318

Just a snippet from the Office of National Stats (ONS):

"ONS collects about 120,000 prices every month for a 'basket' of about 650 goods and services. The change in the prices of those items is used to compile the two main measures of inflation: the Consumer Prices Index (CPI) and Retail Prices Index (RPI). The Bank of England uses the CPI as its inflation target while the RPI is used to calculate increases in pensions and other state benefits."

Fella

exel1966 wrote: »

So is it really worth tieing funds up for 3 or 5 years as an awful lot can happen within that time?

I don't think you have to tie your money up for that long: Don't you get the good interest rate as long as the funds are held for at least a year?

Access

If you need to take money out before the end of the term, you can cash in your Savings Certificates whenever you like. Any returns you earn are still tax-free. Savings Certificates cashed in within the first year of investing don’t earn any index-linking or extra interest, so it’s best to keep them for at least a year. If you cash in Certificates any time after the first year, you will earn index-linking and extra interest for each complete month you’ve held them.

isofa

Spot on, you can take it out, and get the benefits on interest after 12 months, but not before (or you'll get no interest).

But unless you really don't want to tie the money up, as it's tax free, I'd let it grow for the term, and when it comes to maturity, you can then effectively reinvest it all - which if you invested 15K, will be more than new investors can.

margaretclare

isofa wrote: »

Spot on, you can take it out, and get the benefits on interest after 12 months, but not before (or you'll get no interest).

But unless you really don't want to tie the money up, as it's tax free, I'd let it grow for the term, and when it comes to maturity, you can then effectively reinvest it all - which if you invested 15K, will be more than new investors can.

What a good idea.

I'm planning to diversify from my equity ISA - leave the money that's in there, I don't want to take it out at the bottom of the market! But instead of paying into it I intend to max out my cash ISA instead and then look at NS&I.

Thank you, Kittie, for the suggestion on the 'silver savers' board, which unfortunately got diverted into a fruitless discussion about whether all pensioners are poor and therefore unable to save, and whether those of us who are able to save should be seen as the same as those who aren't!

Margaret

missile

I am glad you took my advice

margaretclare

missile wrote: »

I am glad you took my advice

I didn't. I took Kittie's advice. She's an older woman with a similar outlook to myself - still saving and investing.

Margaret

missile

Whatever, I am glad to see you changed your mind:rolleyes:

exel1966

Fella wrote: »

I don't think you have to tie your money up for that long: Don't you get the good interest rate as long as the funds are held for at least a year?

Access

If you need to take money out before the end of the term, you can cash in your Savings Certificates whenever you like. Any returns you earn are still tax-free. Savings Certificates cashed in within the first year of investing don’t earn any index-linking or extra interest, so it’s best to keep them for at least a year. If you cash in Certificates any time after the first year, you will earn index-linking and extra interest for each complete month you’ve held them.

Then that put's a different slant on things as currently I would only be able to tie the funds up for 18-24 months which would suit me nicely.
With at least one more, if not two base rate rises forecast this year though you should be able to get a savings account around 6.5+% AER and a Bond perhaps as high as 7% shortly. Would the 1.35% be likely to increase to or is that an unknown quantity ?
Current 1 year bonds are paying as much as 5.38% Net with increase(s) likely so for a lower rate tax payer You'de be better off with these unless the RPI rises significantly.
How much of a shift month by month usually takes place 0.25% , 0.50% , 0.75% ? Is last months change of 1.00% extreme by usual changes ?