NS&I Index Linkers

OldScientist

DRS1 said:

ChesterDog said:

I'm wondering when they'll start paying LESS than CPI, but still retaining a link...

It's getting close these days.

I thought the + 0.01% was a product of low interest rates generally.  I was hoping they might increase it now rates are higher.

My guess is that
a) during the period of low interest rates and inflation, they were not attractive to customers (and hence why they withdrew them from sale). IIRC, at one point this site was suggesting that they were not good value for money.
b) Since we now appear to be going through a period of higher interest rates and less certainty about future inflation they are not attractive to the issuer (i.e., NS&I and hence UK plc) compared to time limited inflation linked gilts (i.e., I think it is easier to manage debt repayments through gilts than through the retail alternative). Presumably, someone has noted a resurgence of retail interest in individual gilts too.

To satisfy my curiosity, does anyone know what happens to NS&I inflation linked accounts during deflation (that might be a difference between them and gilts)?

SnowMan

OldScientist said:

To satisfy my curiosity, does anyone know what happens to NS&I inflation linked accounts during deflation (that might be a difference between them and gilts)?

Page 6 of

https://www.nsandi.com/files/asset/pdf/index-linked-savings-certificates-key-features-n.pdf

Index-linked growth

On each anniversary of the date you invested we will add an amount to your Certificate to reflect any overall increase in the CPI. We call this your index-linked growth. 

To calculate your index-linked growth, we multiply the value of your Certificate by the percentage increase (if any) in the CPI over the investment year. To calculate the percentage increase over your investment year, we look at the index at two points in time – two months before the start of the investment year, and two months before the end. (We use the index value from two months earlier because the index takes time to be compiled and published.). 

If there is a decrease in the CPI, the value of your Certificate will not reduce

nyermen

Stubod said:

..not read the detail, but I didn't think there was an option to "invest more" at some point in the future??

If savings / ISA's are paying more there seems little point in renewing any of them unless you are of the opinion that savings rates will dip below inflation again at some point??

Think you’re right, it’s probably a left over term that they’ve not removed.
We’re in a strange time now, where savings rates are tracking the BoE base rate, and mortgage rates are tracking gilts (as they do…), but that the gap between them might be widening.  Hence eg. HSBC are reducing their savings rates but increasing their mortgage rates.