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  • FIRST POST
    • C_Mababejive
    • By C_Mababejive 7th Nov 18, 10:14 AM
    • 10,688Posts
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    C_Mababejive
    NS&I to shaft savers again. RPI to CPI (index linked bonds)
    • #1
    • 7th Nov 18, 10:14 AM
    NS&I to shaft savers again. RPI to CPI (index linked bonds) 7th Nov 18 at 10:14 AM
    Isnt it strange how HM Government via its agency the MS&I says that using RPI is outmoded and inaccurate and therefore they will switch inflation linking on its index linked bond product from RPI to CPI in 2019,,and yet when it comes to other things, they are quite happy to accept the status quo?

    For example, student loan debt repayments, the annual rail fair increase for our national joke of a service, the interest payments on the free giveaway Help to buy loans etc..

    Essentially,,anything involving income and charging.. Government is happy with RPI.

    Anything involving expenditure- Oh no,we need CPI

    Well why then dont they apply CPI to Government gilts ? Answer, because they are hypocrites, bullys and cowards and whilst they have no scruples or fear of ripping off savers and pensioners, they do fear upsetting their fat cat friends in the city and messing up the economy by applying the same rules to gilts.

    Government is happy to squander taxpayer cash to help the profligate but they make the prudent pay for it i.e savers.

    Examples of profligacy,,proposed free loans to help out those who got payday loans, free loans to buy shoddy over priced new homes from major housebuilders..witness the rising share prices of housebuilders propped up by Government policy and the latest scandal of the persimmon CEOs burgeoning pay bonuses.

    The lesson to savers is,,dont bother,you are being mugged over. Spend spend spend and when you have no more, get some debt
    Feudal Britain needs land reform. 70% of the land is "owned" by 1 % of the population and at least 50% is unregistered (inherited by landed gentry). Thats why your slave box costs so much..
Page 3
    • Biggus Dickus
    • By Biggus Dickus 9th Nov 18, 8:30 AM
    • 37 Posts
    • 23 Thanks
    Biggus Dickus
    >> There is an article behind the Telegraph paywall today which claims a "trick" can be used by existing RPI holders using a "little known perk"

    Given that all ILSCs must have been rolled over by now I suspect that "little known perk" is known to everyone to whom it applies.

    The last one's sold were May - Sept 2011 5 year, a re-introduction when a lot were taken out.
    They will have been rolled over in 2016 to 2021 - the same as a 3 year now.
    Wonder if that's a coincidence. Wish I'd started converting to 5 year earlier.

    Anyone know how to download a list of the certificates from the NS&I site?
    Originally posted by nrsql
    Not sure if this is of help;... I don’t believe there is any ‘download’ facility as such but there is a ‘Print’ facility available within the current ‘valuation page’ for each individual ILS certificate.
    • short butt sweet
    • By short butt sweet 9th Nov 18, 8:48 AM
    • 116 Posts
    • 74 Thanks
    short butt sweet
    That plan would mean HMG would have to actually pay real money to people whose certificates where being forbidden from being rolled over under your idea.
    Which in turn means HMG would have to borrow the money from somewhere else to do so - remember that HMG does not have any money at all - it is all our money either borrowed or taxed.
    At the moment most people roll over their holdings in NS&I so although they get interest paid its is paper exercise only in that no real money is actually paid out to the investor. So it's actually costing the government next nothing in real money terms.
    Originally posted by Uxb
    you are very confused about how money works (as are most people, to be fair).

    what is this "real money"? we use sterling as money in the UK. sterling is IOUs issued by the UK. a ten pound note carries the promise to pay the bearer ... another ten pound note!

    where does money come from? since money is IOUs issued by the UK, there is only place it can come from: the UK spending money, which puts those IOUs into people's hands.

    taxation takes some of those IOUs back, cancelling them. tax can't come before spending, because nobody would have any IOUs from the UK if it hadn't spent the money into existence first. the process is: spend then tax, not: tax then spend.

    to the extent that spending exceeds taxation (as is normal), it can be funded by either cash (just paying people with those IOUs), or borrowing, or a mixture of the two.

    after cash has been spent into existence (e.g. £10 is spent, and only £3 comes back it tax, so there is an extra £7 of cash out there), the UK can offer to sell gilts or NS&I products (they are just different forms of borrowing - neither is more "real" than the other). e.g. suppose a new gilt is issued. so if £7 of gilts are offered for sale, somebody buys them for £7 cash. so there is no longer £7 extra cash in existence, and instead there is £7 of extra gilts. this is what was usually done before QE.

    but under QE, this process has been reversed. some gilts were bought back by the UK, and more cash issued in their place.

    the combination of the usual process of issuing gilts, and QE partially reversing that process, means that the excess of UK public spending over taxation has been funded by a mixture of cash and borrowing since 2009.

    don't get the dynamics of the situation wrong. money to be spend by the UK doesn't come from somebody else saving it first. it's spent into existence by the UK spending it. which results in somebody having more savings. the national debt and the national savings are two sides of the same coin.

    note: it is true that the UK government doesn't have any money. because it is meaningless for it to hold IOUs issued by itself. just like it's meaningless for me to write out IOUs and keep them in a drawer; my IOUs only matter when i give them to other people. similarly, the UK's IOUs only matter when they're in the hands of somebody other than the UK itself. the only difference between my IOUs and the UK's are that the UK's IOUs are money, and mine aren't. so the UK has the ability to create money by spending it, and i don't: i can offer to pay with my IOUs but they're not widely accepted (why not, eh?!).
    Last edited by short butt sweet; 09-11-2018 at 8:58 AM.
    • RG2015
    • By RG2015 9th Nov 18, 10:24 AM
    • 1,453 Posts
    • 907 Thanks
    RG2015
    Not sure if this is of help;... I don’t believe there is any ‘download’ facility as such but there is a ‘Print’ facility available within the current ‘valuation page’ for each individual ILS certificate.
    Originally posted by Biggus Dickus
    If there is a print facility they may be able to print to pdf.
    • Andy L
    • By Andy L 9th Nov 18, 10:57 AM
    • 9,263 Posts
    • 7,943 Thanks
    Andy L
    Depends on the cost they have committed us to. I've heard stories about £100 to change a light bulb etc
    Originally posted by Glen Clark
    yes, but those stories are basically a load of...bulbs.

    it tends to be either a flat rate for small works, so you win on some & lose on others but it all comes out the same at the end but with a save on admin overheads.
    Or its not just changing a 60w bulb on an angle-poise but a whole new luminaire & wiring or a specialist bulb (eg you can pay £100+ just for a projector or endoscope bulb).
    Last edited by Andy L; 09-11-2018 at 11:02 AM. Reason: typo
    • ColdIron
    • By ColdIron 9th Nov 18, 11:14 AM
    • 4,812 Posts
    • 6,325 Thanks
    ColdIron
    They also have Sevice Level Agreements so you need a man with a ladder on call that can get there in an hour and a stockpile of a zillion different bulbs
    • nrsql
    • By nrsql 9th Nov 18, 1:26 PM
    • 1,825 Posts
    • 635 Thanks
    nrsql
    Not sure if this is of help;... I don’t believe there is any ‘download’ facility as such but there is a ‘Print’ facility available within the current ‘valuation page’ for each individual ILS certificate.
    Originally posted by Biggus Dickus
    Thanks but the problem is that I don't want to do each one individually.
    Guess I'll have to stick with the total.
    • Chris75
    • By Chris75 9th Nov 18, 4:20 PM
    • 152 Posts
    • 54 Thanks
    Chris75
    I don't know about downloading but you can certainly phone them & ask for a holders statement in the post.
    • londoninvestor
    • By londoninvestor 9th Nov 18, 6:24 PM
    • 414 Posts
    • 336 Thanks
    londoninvestor
    3) not undermining tax policy.

    ILSCs are far more attractive to people in higher tax brackets. why? i can see no reason at all to offer tax-free products that are specific to NS&I (i am not referring to ISAs from NS&I - that is different, because other providers can offer ISAs).
    Originally posted by short butt sweet
    Your idea makes a lot of sense in general. On this point though, one thing to think about is that index-linked gilts also provide a mostly tax-free return. The coupons are taxed as interest. But most of the return doesn't come from the coupon, it comes from the capital gain as the principal accretes with inflation - and gilts are exempt from CGT, so that gain is tax-free.

    So currently, the tax "advantage" of ILSCs is really just that your 0.01% of interest is exempt from tax.
    • C_Mababejive
    • By C_Mababejive 9th Nov 18, 6:35 PM
    • 10,688 Posts
    • 9,563 Thanks
    C_Mababejive
    You moan despite your savings being subsidised by taxpayers:
    https://www.thisismoney.co.uk/money/saving/article-1723973/NSI-inflation-bonds-a-subsidy-for-the-rich.html
    The government could save money by stopping the rollover of index-linked certificates and the BoE raising the money by issuing gilts.
    Originally posted by Economic
    We are digressing slightly but its all interesting stuff. The article says its a subsidy for the rich but what is rich? Who is rich? How much nett worth do you have to have to be considered rich? Its subjective. I'd say multimillionaires are rich.

    The obvious question is,well if HMG could have done the above, why didnt they just do it instead of fishing for my promissory notes? There must have been an agenda??
    Feudal Britain needs land reform. 70% of the land is "owned" by 1 % of the population and at least 50% is unregistered (inherited by landed gentry). Thats why your slave box costs so much..
    • Thrugelmir
    • By Thrugelmir 9th Nov 18, 11:25 PM
    • 60,971 Posts
    • 54,174 Thanks
    Thrugelmir
    We are digressing slightly but its all interesting stuff. The article says its a subsidy for the rich but what is rich? Who is rich? How much nett worth do you have to have to be considered rich? Its subjective. I'd say multimillionaires are rich.
    Originally posted by C_Mababejive
    £2 billion wasn't an insignificant sum in 2011. To put that figure into perspective it amounts roughly to the net contribution to UK pension schemes on a monthly basis in 2018. Must have been some wealthy savers to find that amount of money.
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • short butt sweet
    • By short butt sweet 10th Nov 18, 1:40 AM
    • 116 Posts
    • 74 Thanks
    short butt sweet
    We are digressing slightly but its all interesting stuff. The article says its a subsidy for the rich but what is rich? Who is rich? How much nett worth do you have to have to be considered rich? Its subjective. I'd say multimillionaires are rich.
    Originally posted by C_Mababejive
    well, nobody thinks they're rich. everybody thinks that being rich means having a bit more money than they do themselves. i read a post on another forum where somebody who had something like £5m thought that wealth taxes should perhaps apply to people with more than £5m.

    however, offering a higher return than necessary on ILSCs (or via any other other product that you can only benefit from if you have some capital) does favour relatively richer people, in the sense that:

    a) people with no capital at all can't benefit from it at all. and many people (in the UK) do have virtually no savings.

    b) people with more capital can benefit from it more than people with less capital.

    IMHO, it's not necessarily wrong to have any subsidies whatsoever that benefit people with some capital. but it's fair to ask: what is the purpose of the subsidy? who is it directed at? (it may be more defensible if it's directed at people who don't have much capital, or if there is a cap on how much capital a person can hold that will benefit from it.) what does it cost? and so on.

    The obvious question is,well if HMG could have done the above, why didnt they just do it instead of fishing for my promissory notes? There must have been an agenda??
    politics. people who hold lots of ILSCs are relatively rich, middle-class, old, and good at lobbying their MPs if something happens which they don't like.

    a sudden change, such as ending rollover of ILSCs, tends to lead to a big wave of lobbying, which can result in the decision being overturned. it could also lead to anybody at NS&I who made such a decision getting into trouble with the government ministers (at the treasury) who oversee NS&I. i can totally understand why nobody at NS&I would stick their neck out like that. it's up to politicians to give a lead if they want a policy change.
    • short butt sweet
    • By short butt sweet 10th Nov 18, 1:54 AM
    • 116 Posts
    • 74 Thanks
    short butt sweet
    Your idea makes a lot of sense in general. On this point though, one thing to think about is that index-linked gilts also provide a mostly tax-free return. The coupons are taxed as interest. But most of the return doesn't come from the coupon, it comes from the capital gain as the principal accretes with inflation - and gilts are exempt from CGT, so that gain is tax-free.

    So currently, the tax "advantage" of ILSCs is really just that your 0.01% of interest is exempt from tax.
    Originally posted by londoninvestor
    interesting point.

    the taxation of index-linked gilts is a perhaps a bit anomalous. i haven't really thought about whether or how it should be changed, though. (i'm not quite sure if index-linked corporate bonds are taxed the same way?)

    a detail: with the current prices of index-linked gilts, you won't get all the index-linking tax-free, in that you will pay tax on the full coupon and then get a capital loss (perhaps not a loss in GBP, but a loss relative to RPI) which can't be offset against anything for tax purposes. and this is not always something that evens out over the lifetime of the gilt (i.e. if you bought at issue, you'd have a gain today, which will be given up again when it reaches maturity), because additional tranches of existing index-linked gilts have be sold at a long way above their face value.
    • londoninvestor
    • By londoninvestor 10th Nov 18, 9:30 PM
    • 414 Posts
    • 336 Thanks
    londoninvestor
    a detail: with the current prices of index-linked gilts, you won't get all the index-linking tax-free, in that you will pay tax on the full coupon and then get a capital loss (perhaps not a loss in GBP, but a loss relative to RPI) which can't be offset against anything for tax purposes. and this is not always something that evens out over the lifetime of the gilt (i.e. if you bought at issue, you'd have a gain today, which will be given up again when it reaches maturity), because additional tranches of existing index-linked gilts have be sold at a long way above their face value.
    Originally posted by short butt sweet
    True. We should probably say that current ILSCs (completely tax free) are more favourable than IL gilts (income tax on the coupon which is typically 0.05% - 1% of accreted notional - with one outlying 2022 gilt up at 1.29%), which would be more favourable than ILSCs which were completely taxable.

    interesting point.

    the taxation of index-linked gilts is a perhaps a bit anomalous. i haven't really thought about whether or how it should be changed, though. (i'm not quite sure if index-linked corporate bonds are taxed the same way?)
    Originally posted by short butt sweet
    Now this gets more interesting again

    The CGT exemption per se is just for gilts (both conventional and linkers).

    However a corporate index-linked bond may be caught by the Deeply Discounted Securities rules, which effectively convert capital gains into income for tax purposes. See example 1 in HMRC's manual. Gilts (other than strips) are specifically excluded.

    Those rules would also apply to bonds issued with a low coupon, but where a rising rate environment causes them to trade at a discount to par, so that most of the return comes from the payment at maturity. That makes some economic sense I'd say - if I buy a bond now, I'm doing so based on its yield now and I don't care too much what it yielded when I was issued. So a fully taxable ILSC would be in line with that principle - just not with how IL gilts currently work. (I also haven't thought that much about what the ideal treatment would be!)
    • capital0ne
    • By capital0ne 11th Nov 18, 5:39 PM
    • 555 Posts
    • 268 Thanks
    capital0ne
    We are digressing slightly but its all interesting stuff. The article says its a subsidy for the rich but what is rich? Who is rich? How much nett worth do you have to have to be considered rich? Its subjective. I'd say multimillionaires are rich.
    Originally posted by C_Mababejive
    Ranking by Wealth
    To reach the top 1% worldwide in terms of wealth – not just income but all you own – you’d have to possess $770,000 in net worth, which includes everything from the equity in your home to the value of your investments. That’s equal to roughly:
    £593,539
    671,451 euros
    56.3 million Indian rupees
    5.3 million Chinese yuan
    See more here https://www.investopedia.com/articles/personal-finance/050615/are-you-top-one-percent-world.asp
    • short butt sweet
    • By short butt sweet 12th Nov 18, 3:33 PM
    • 116 Posts
    • 74 Thanks
    short butt sweet
    The CGT exemption per se is just for gilts (both conventional and linkers).

    However a corporate index-linked bond may be caught by the Deeply Discounted Securities rules, which effectively convert capital gains into income for tax purposes. See example 1 in HMRC's manual. Gilts (other than strips) are specifically excluded.

    Those rules would also apply to bonds issued with a low coupon, but where a rising rate environment causes them to trade at a discount to par, so that most of the return comes from the payment at maturity. That makes some economic sense I'd say - if I buy a bond now, I'm doing so based on its yield now and I don't care too much what it yielded when I was issued. So a fully taxable ILSC would be in line with that principle - just not with how IL gilts currently work. (I also haven't thought that much about what the ideal treatment would be!)
    Originally posted by londoninvestor
    ok. so IL gilts are perhaps being treated a bit softly for tax, since they escape the Deeply Discounted Securities rule, and it catches IL corporate bonds.
    • talexuser
    • By talexuser 12th Nov 18, 4:47 PM
    • 2,499 Posts
    • 1,988 Thanks
    talexuser
    Ranking by Wealth
    To reach the top 1% worldwide in terms of wealth – not just income but all you own – you’d have to possess $770,000 in net worth, which includes everything from the equity in your home to the value of your investments. That’s equal to roughly: £593,539
    Originally posted by capital0ne
    An interesting figure but surely pulled down by the vast amount of destitute poverty around the world. 600 grand including your home/pension is not particularly rich in terms of the UK, though obviously a lot richer than people on minimum wage, renting, on benefits etc. Rich in the UK would be the top 10%, 1% and 0.1% depending on your point of view. I think the last time I read the top 10% total wealth here started around 1.2 mil?
    • C_Mababejive
    • By C_Mababejive 12th Nov 18, 6:07 PM
    • 10,688 Posts
    • 9,563 Thanks
    C_Mababejive
    An interesting figure but surely pulled down by the vast amount of destitute poverty around the world. 600 grand including your home/pension is not particularly rich in terms of the UK, though obviously a lot richer than people on minimum wage, renting, on benefits etc. Rich in the UK would be the top 10%, 1% and 0.1% depending on your point of view. I think the last time I read the top 10% total wealth here started around 1.2 mil?
    Originally posted by talexuser
    Agreed,whilst the data is interesting it should be more localised. As it stands I'm in the 1% but i dont feel that wealthy..
    Feudal Britain needs land reform. 70% of the land is "owned" by 1 % of the population and at least 50% is unregistered (inherited by landed gentry). Thats why your slave box costs so much..
    • Herbalus
    • By Herbalus 12th Nov 18, 6:16 PM
    • 2,138 Posts
    • 1,776 Thanks
    Herbalus
    Agreed,whilst the data is interesting it should be more localised. As it stands I'm in the 1% but i dont feel that wealthy..
    Originally posted by C_Mababejive
    Feely wealthy is comparative to those around you.

    If I had the means to buy a £2m flat in central London I would know full well that everyone else in the building had spent £2m on theirs, and their Rolls Royce etc would make my bicycle look cheap. I'd also be window-shopping for the £10m flats on the next street. I wouldn't feel wealthy then.
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