NS & I Index Linked bonds moving to CPI

buffman

I don't hold much hope that the various campaigns to stop NS & I Index Linked bonds being linked to the CPI from May instead of to the RPI will have any success.

As the RPI is usually about 0.8% higher than the CPI, it makes sense for anyone with bonds maturing before May to maximise the time that their savings are linked to the RPI (rather than the CPI) by rolling their holdings over for five years (instead of three).

However I have a number of three year bonds maturing in June and beyond. Is anyone aware of any way or trick to prematurely roll these bonds over before they mature and CPI linking becomes the only option?

poppy10_2

buffman wrote: »

Is anyone aware of any way or trick to prematurely roll these bonds over before they mature and CPI linking becomes the only option?

This can't be done, sorry. You can only renew the bonds within one month of maturity.

polymaff

You can instruct early, but surely the new bond will be issued under the terms and conditions applicable on the day after the old bond's maturity date.

kidmugsy

I'm miffed at the reduction in return. On the other hand I can't see any rational justification for the privilege afforded to those of us who already own these certificates of being the only people allowed to buy new ones (by rolling over old ones).

I suppose it's because .... drum-roll .... we might vote to punish whoever takes our lovely privilege away.

But then there are a million irrational privileges doled out by politicians, so I'm mighty pleased that I've got this one.

polymaff

They issue new bonds solely to meet H M Treasury's need for extra capital. At the moment H M Treasury need neither more nor less capital and NS&I respond accordingly. The current NS&I policy is the cheapest way of implementing that HMT requirement.

kidmugsy

polymaff wrote: »

They issue new bonds solely to meet H M Treasury's need for extra capital. At the moment H M Treasury need neither more nor less capital and NS&I respond accordingly. The current NS&I policy is the cheapest way of implementing that HMT requirement.

That may be what they say. To believe them I'd have to believe that they would have had trouble selling RPI-linked certificates on the personal savings market for the last umpty-um years. Given that index-linked gilts have offered yields about 1.5% p.a. below RPI for several years, I think I can dismiss that explanation as bogus.

polymaff

polymaff wrote: »

They issue new bonds solely to meet H M Treasury's need for extra capital. At the moment H M Treasury need neither more nor less capital and NS&I respond accordingly. The current NS&I policy is the cheapest way of implementing that HMT requirement.

kidmugsy wrote: »

That may be what they say. To believe them I'd have to believe that they would have had trouble selling RPI-linked certificates on the personal savings market for the last umpty-um years. Given that index-linked gilts have offered yields about 1.5% p.a. below RPI for several years, I think I can dismiss that explanation as bogus.

I don't follow your logic, nor see its particular relevance to my post - which made no reference to indices. It is just all to do with filling HMT quotas as cheaply as possible




But turning to indices, the ONS reviles the RPI with a passion worthy of Stalin himself - indeed it now seems to be regarding CPI as another "running dog" - the new passion being the CPIH. Without that Stalinist zeal, the Government just likes that CPI is below RPI - and looks like it will stay so

So NS&I are hardly out of step with the general Government trend when they choose - as they have always had the right to, to move ILSCs to a different index.

I doubt that NS&I - even using CPI - would have any trouble placing a future issue of ILSCs. Look what happened when they opened the gates wider on growth and income bonds. Money cascaded in and they quickly had to slam the door by reducing the holding limit 100-fold - a radical (aka panic) reaction by any measure.

It's tough - but that's life. If you were them, wouldn't you do the same - everyone?

Thrugelmir

kidmugsy wrote: »

That may be what they say. To believe them I'd have to believe that they would have had trouble selling RPI-linked certificates on the personal savings market for the last umpty-um years. Given that index-linked gilts have offered yields about 1.5% p.a. below RPI for several years, I think I can dismiss that explanation as bogus.

NSI has to be competitive with the wider savings market and not offer market leading rates.

nrsql

I don't see how any campaign to preserve RPI linking can succeed.
If a lot of people decide not to roll over due to this then all that will happen is that they would open another tranche to get more investment to cover it - I would be happy with that.
Would you buy CPI linked certificates now if you could?

Just be grateful that they are continuing, it's a benefit not a right.
A complaint might be that expenses tend to be linked to RPI and income to CPI but that's something we have to live with.