Index linked accounts + RPI weightings

edindie

Hi, I’m thinking of opening a Leeds Building Society RPI+2 ISA and I’ve got 2 Questions:

1) Does anyone know anything about the RPI? Specifically

· What weighting does housing have in the RPI?
· Would ANY fall in house prices put the RPI lower than the CPI, are there any other differences?
· Can you get CPI linked savings accounts?



2) Can someone help me understand the terms and conditions of the account?

Transfers out/Withdrawals:
“For account transfers or withdrawals between 1st June 2008 and 31st May 2009, you will receive interest that is credited on 31st May and 2% tax free on the amount transferred or withdrawn.”

This means that if I withdraw money on the 1st January 2009 I’ll get 2% interest on the money I withdraw from 31st May to 1st of Jan, but still receive RPI+2 on the rest. Yes?

Also Interest is calculated daily, but is only paid in every year. Is this the norm or is it a bit sly?



Many thanks for your help anyone who answers.

macca64

Interest being calculated daily and being credited annually is normal, nothing sly about it.

martinman3

edindie wrote: »

Hi, I’m thinking of opening a Leeds Building Society RPI+2 ISA and I’ve got 2 Questions:

1) Does anyone know anything about the RPI? Specifically

· What weighting does housing have in the RPI?
· Would ANY fall in house prices put the RPI lower than the CPI, are there any other differences?
· Can you get CPI linked savings accounts?



2) Can someone help me understand the terms and conditions of the account?

Transfers out/Withdrawals:
“For account transfers or withdrawals between 1st June 2008 and 31st May 2009, you will receive interest that is credited on 31st May and 2% tax free on the amount transferred or withdrawn.”

This means that if I withdraw money on the 1st January 2009 I’ll get 2% interest on the money I withdraw from 31st May to 1st of Jan, but still receive RPI+2 on the rest. Yes?

Also Interest is calculated daily, but is only paid in every year. Is this the norm or is it a bit sly?



Many thanks for your help anyone who answers.

From the document describing how RPI is calculated
http://www.statistics.gov.uk/elmr/04_08/downloads/ELMR_Apr08_Gooding.pdf

housing costs are on page 19

Housing

Rent
Private furnished rent Private unfurnished rent
Local authority rent Registered Social Landlord (RSL) rent
Mortgage Interest
Average interest payments (estimated/modelled)
Depreciation
Depreciation costs proxy (price index for houses purchased with a mortgage)
Council Tax
Average council tax bills for households in Great Britain
Average rates bills in Northern Ireland
Water and Other Charges
Average water charges
Average sewerage and environmental charges
Repair and Maintenance Charges
Fees charged by plumbers, electricians, carpenters and decorators
Gas service charges
DIY Materials
Ready mixed filler Wallpaper
Wallpaper paste Paint
Varnish Paint brush
Various tools - eg hammer drill, screwdriver Aluminium ladder
Door handle Taps
Power point Shower head
Pieces of timber Ceramic tiles
Hire of domestic steam wallpaper stripper Woodscrews
Dwelling Insurance and Ground Rent
Dwelling insurance premiums of selected companies

Ground rent proxy (price index for houses purchased with a mortgage)

As you can see house prices are not included, but rent, mortgage payments, council tax are.

For transfers/withdrawals as far as I can tell you are correct, you lose the RPI part and just get the 2% AER on the transfer/withdrawal. I assume that what is left in the account earns RPI+2% interest as usual. This tells me that withdrawals should be made on 1st June or as soon after as possible to avoid loss of interest.

If you are unsure about the terms and conditions you should always ring them and check. Never believe anything on this forum without checking it yourself.

edindie

Thanks for that. Especially pointing out that it’s rent and mortgage payment, not actual house prices which are included.

I think I’ll go for it now.