Query: NS&I Index-linked Certificates interest

whu

nrsql wrote: »

From the t's & c's

16. An index-linked value will be calculated as V x B/A where:
(a) 'V' is the value of the Certificate at the beginning of the index-linked period (this will be the purchase price or the value at an anniversary date);
(b) 'A' is the Index figure applicable to the calendar month in which the first day of the index-linked period falls (this day will be the purchase date or an anniversary of it); and
(c) ‘B’ is the index figure applicable to the calendar month in which the day after the final day of the index-linked period falls. This will be the maturity date, an anniversary date, or the day after the last completed month for which index-linking is earned.


With the provoso
any anniversary value will never be less than the preceding anniversary value

Thanks - does that mean that if you bought today and the value is 4.2 and then on the anniversary date (12 months later) it was 3.8 you would get 4.2 plus .55 as any anniversary value wil never be less than the preceding anniversary value

Jonbvn

nrsql wrote: »

That's right but not many people expect inflation to come down in the near future.

AFAIK, inflation has never dropped below 0% in this country. However negative inflation (deflation) has occurred in Japan.

chris1

whu wrote: »

Thanks - does that mean that if you bought today and the value is 4.2 and then on the anniversary date (12 months later) it was 3.8 you would get 4.2 plus .55 as any anniversary value wil never be less than the preceding anniversary value

Sounds like you would get the value in 12 months time, i.e. 3.8 plus .55. If prices hadn't changed at all (so inflation was zero) you would only get the .55. If prices had dropped (deflation), you would just get the .55.

IGK

whu wrote: »

Thanks - does that mean that if you bought today and the value is 4.2 and then on the anniversary date (12 months later) it was 3.8 you would get 4.2 plus .55 as any anniversary value wil never be less than the preceding anniversary value

It dosn't really matter what the current rate of RPI is, as it's just a calculation of the historical change in the index over the last year.
What you get is the percentage change of the index between when you invest and a year's time.

pmdpmd

Lyn,

Can you give the URL for the calculator please? Can't seem to find it.

Cheers,
Paul.

Lyncroft wrote: »

On 1 May 2007 I invested in a 3 year certificate for £15000. According to their calcualtor it's now worth £15888. Not bad at all.

Biggles

whu wrote: »

Thanks - does that mean that if you bought today and the value is 4.2 and then on the anniversary date (12 months later) it was 3.8 you would get 4.2 plus .55 as any anniversary value wil never be less than the preceding anniversary value

The current value isn't 4.2, the current rate of inflation happens to be 4.2%. But the payment is based on the Index, which stands at 214.0 (ie 4.2% higher than 12 months ago).

Your payment on the anniversary day will depend what the Index stands at then; if, for example, it stood at 222.5, your index-linking payment would be 4.0% of your investment.

Can you give the URL for the calculator please? Can't seem to find it.

http://www.nsandi.com/products/ilsc/calculator.jsp

nrsql

whu wrote: »

Thanks - does that mean that if you bought today and the value is 4.2 and then on the anniversary date (12 months later) it was 3.8 you would get 4.2 plus .55 as any anniversary value wil never be less than the preceding anniversary value

No (would be nice but a bit too good for a product).
It means that your investnment cannot go down and is talking about the index value not the annual percentage increase.
You would get the 3.8%. If the index had decreased over the year so that the annual change was negative you would get 0% rather than losing.

simonfitba

Would anyone recommend buying the current issue of these.

I already have some from about a year ago.

nrsql

Yes.

>> I already have some from about a year ago.
Take a pat on the back.

Depends on your situation but it's not a bad product.
I would put it behind cash ISAs

1 year fixed are around 7% which makes them a better rate for basic rate taxpayers so you would be relying on future increases in RPI or reductions in fixed rates in a years time.
For higher rate taxpayers it looks good at the moment.

It's up to you but doesn't look like it would be a big mistake whatever happens.