NS&I Income Bonds

labp04

polymaff said:

"

Thought that I'd better makes sure that the sophistry of labp04's post was clearly nailed as such.  To be "around twice the current rate of inflation" would be "around" 1.4% by the ONS-preferred figure or, even a more unlikely 2.0% by our ailing, but faithful, old friend, RPI.  When will we see those rates again?

Plus, of course, those are before tax, which more than just I pay, so at least 1.75% required to help me have my outgoings protected - according to labp04's bizarre view of reality  ...

"Sophistry . . . bizarre view of reality" - bit harsh they are and tempting to say something about snotty batards on here - but I won't! Wonder if the same snotty comments should be levelled at:
"While inflation at 0.5% is at its lowest rate for four year . . . " Weekend Moneyfacts 27/06/20
"CPI dropped to 0.50% in May" Savings Champion 23/06/20
Wonder how anyone decides who to believe

RG2015

labp04 said:

polymaff said:

"

Thought that I'd better makes sure that the sophistry of labp04's post was clearly nailed as such.  To be "around twice the current rate of inflation" would be "around" 1.4% by the ONS-preferred figure or, even a more unlikely 2.0% by our ailing, but faithful, old friend, RPI.  When will we see those rates again?

Plus, of course, those are before tax, which more than just I pay, so at least 1.75% required to help me have my outgoings protected - according to labp04's bizarre view of reality  ...

"Sophistry . . . bizarre view of reality" - bit harsh they are and tempting to say something about snotty batards on here - but I won't! Wonder if the same snotty comments should be levelled at:
"While inflation at 0.5% is at its lowest rate for four year . . . " Weekend Moneyfacts 27/06/20
"CPI dropped to 0.50% in May" Savings Champion 23/06/20
Wonder how anyone decides who to believe

Lies, damn lies and statistics. What to believe? None of them.

Inflation is different for everyone as no one has the exact same basket of goods.

PS You comment is neither sophistry nor bizarre.

bowlhead99

RG2015 said:

labp04 said:

Wonder how anyone decides who to believe

Lies, damn lies and statistics. What to believe? None of them.

Inflation is different for everyone as no one has the exact same basket of goods.

PS You comment is neither sophistry nor bizarre.

Agreed with all of that.

It's certainly true that NS&I's income bonds at 1.16% or their direct saver at 1% have not paid twice as much as the last year's inflation when measured by CPIH (which is the ONS's preferred measure of what the country is spending its money on, compared to CPI which excludes the housing costs of the 17-18 million households who are owner-occupiers). If 30% of people's money is spent on housing and household services (including council tax), it seems a bit of a swizz to exclude all the council tax and the housing costs of the more than half of all households who own their homes,  to create an exclusively 'consumer' measure of inflation which doesn't capture how millions of households actually spend their money. 

But of course, the basket of what the ONS surveys say we are spending your money on is not what you personally are spending your money on. Someone who only ever spent their money on the CPI basket of 'energy' and didn't pay for any other goods or services or the roof over their head would have experienced negative inflation of 10%+ for the year, because petrol and diesel and oil got a lot cheaper and gas/electric got a bit cheaper.

The basket of goods set at the start of this year probably had the usual ~3% allocation to package holidays, which showed a small increase in cost over the year to May (more than NS&I pay on their accounts) but I expect not many of us are buying those at the moment and when we emerge properly from lockdown we won't necessarily go back and buy more of the holidays we've missed, to catch up to ONS's expectation.

But ignoring the specific contents of 'the basket' of goods and services - the bigger issue when people say an account 'is paying more than inflation' or 'is paying less than inflation' is that what the account 'is paying' is a rate that they will pay this month and hopefully next month etc, looking forwards. While your measure of inflation is how prices changed in the past, looking backwards. 

For example, a large part of why CPI was low in April and May was because "Liquid fuels, vehicle fuels & lubricants" which had been running at +2.5% in the year to Febuary had fallen to -13% for the year to April and -17.6% for the year to May.  Similarly "clothing and footwear goods" which was at +0.2% for year to February was -3% for the year to April or May.   So CPI and CPIH were only as low as 0.5% and 0.7% for the year to May because petrol/diesel and clothes got 17% and 3% cheaper what with an oil price war, lack of travel and no consumer appetite for clothes shopping. Will clothes drop another 3% and petrol drop another 17% over the year looking forward from now, helping to maintain the 0.5% inflation? If not, there is probably limited usefulness in saying that NS&I is 'paying more than inflation'.

That's why I had mentioned the fact that NS&I were paying several times more than the high street banks' savings accounts (which are directly comparable because it is simply a published rate for money put on deposit today), and not tried to compare them with inflation - which would not be directly comparable, because one is a published rate for money put on deposit today, and the other is a historic measurement of what happened to the prices for goods and services prevailing at May 2019.

polymaff

RG2015: Keeping it brief, as we are somewhat OT.

The basket of goods concept really doesn't have much meaning.  An example:

CPIH, 2008 to 2020 shows a rise of 25%;  Polymaff's Index 2008 to 2020 shows a fall of 20%.

The reason for this is that Polymaff buys in very few services. He's pretty competent at repairs and maintenance.

For me, that'll change - I know - but just bear in mind the radically different inflation profiles of goods and services.

polymaff

BowlHead:  I don't think that most people understand that the figure reported in the media is equally affected by what happened one month and 13 months ago.  ONS used to publish a graphic that made this very clear. They dropped it a while ago. I requested that they put it back.  They replied:

We will certainly take your comments on board and we are hoping to launch a feedback survey on the changes to the bulletin to accompany the September statistical bulletin (scheduled for publication on 16 October). I will happily send you a link to the survey once it has gone live.

I know that the information is also spread across the commentary - but the graphic was far better.  If you - or anyone else - agrees, write to cpi@ons.gov.uk. The graphic was called Figure A

hoc

blue_max_3 said:

hoc said:

Do you have just the one linked current account to both? I like the idea of using DS to more quickly access IB. Does this work in both directions, taking money out of IB as well as paying in faster than otherwise? Do you do bank transfer from current account or debit card payment into DS? This thread has contrasting opinions on which is better. Card payment seems more "secure" to some due to confirmation and appearing instantly (interest is earned immediately although funds can't be accessed until they clear and become available), bank payments may not show up for a few days but become available quicker than card payments. For truly instant it would appear to be debit card into DS and then into IB but I suppose DS won't allow transfer into IB until the payment has actually cleared which takes several days.

The income bond account is linked to the direct saver (interest is paid to the DS). The direct saver is linked to my bank account. To withdraw from my income bond account, I transfer to the direct account and from there to my linked bank account. This shows in my bank account next day. And the reverse, I bank transfer from my current account into my direct saver (shows next day). And then, if over £500, to my income bond account (happens instantly).

Thanks for the replies. Never mind the side discussion, although the other person's points are valid and not being disputed they are not relevant to my questions and while initially seemingly helpful the insistence seems unnecessary and missing the point, I would ignore. Anyway, in my tests I am finding bank payments in and out of IB are typically being processed next day so DS wouldn't offer the speed benefits I was anticipating nor card payments the peace of mind of instantly reflecting as pending. Maybe I will change my mind when I suffer from a bank payment 'black hole'. Using DS to bypass the minimum 500 limit is clever, thanks for that.

colsten

hoc said:

Never mind the side discussion, although the other person's points are valid and not being disputed they are not relevant to my questions and while initially seemingly helpful the insistence seems unnecessary and missing the point, I would ignore. 

Everybody is free to ignore anything that's posted here. However, nobody can insist that information shared in threads must be of relevance to them, and only to them.

bowlhead99

colsten said:

hoc said:

Never mind the side discussion, although the other person's points are valid and not being disputed they are not relevant to my questions and while initially seemingly helpful the insistence seems unnecessary and missing the point, I would ignore. 

Everybody is free to ignore anything that's posted here. However, nobody can insist that information shared in threads must be of relevance to them, and only to them.

I think it's generally accepted that by the time a thread has more than a few posts on it there is going to be something in it worthy of comment other than the very first question posed or comment made.

That's how discussion threads and conversations in general, work    So when you join a thread with 100+ posts on it there would probably be a lot of stuff you could ignore, however 'insistent' you feel some of the posters are being.

jimbow25

polymaff said:

jimbow25 said:

 indeed they were spectacularly uncompetitive during and after the financial crisis a decade ago if I recall correctly.

5+%, tax-free - spectacularly uncompetitive?

Cool it. We know that NS&I are currently offering higher-than-expected rates. We know why. We know that the Government can get lower rates elsewhere on its borrowings - and that this is not something new.

We are, after all, MSE, not the press ..

It depends what else was available at that moment - I did say "if I recall correctly".
5%+ certainly does not sound non-competitive. The basis of my comment was that I recalled in 2008-9 they let their Direct ISA languish to 1-1.5 % (which was certainly very poor at the time) before eventually giving it a kick up to 2.5%. in the period in between I think they were confident that many people would use them regardless of rate because security was suddenly paramount in many savers' minds.
If they were at the top of the best buy chart at an earlier stage, that may have had a similar rationale to what we see now.

lr1277

blue_max_3 said:

The income bond account is linked to the direct saver (interest is paid to the DS). The direct saver is linked to my bank account. To withdraw from my income bond account, I transfer to the direct account and from there to my linked bank account. This shows in my bank account next day. And the reverse, I bank transfer from my current account into my direct saver (shows next day). And then, if over £500, to my income bond account (happens instantly).

Can I ask how you set up this arrangement? Have opened a direct saver account and funded it by debit card. Waiting for the funds to clear.

So looking around the income bond web page, I can't see anything about funding it from the Direct Saver.

Did you do this by completing a form? If so, that way forward is not available at the moment.

Many thanks.