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grey shark

Nsi Index Linked Saving Certs

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Bought loads of these from March 2007 to November 2007 { in trust etc. }, i always thought that investment grew month by month by whatever the monthly was RPI plus 1/12th of the interest , THIS IS NOT THE CASE example .......

15,000k invested in issue14 on 21st March 2007

Value on 21st March 2008 = £15,745 .....this your first year guarantee it all depended on the March RPI .

Cash in value in January 2009 = £16467 ......now ...... RPI is .9% .......so .......

Cash in value in Febuary 2009 = £16136 .....down £331 because RPI has been manipulated down .

So if RPI goes to zero or negative soon all your get is the 1.15% despite there being months of 4% plus in your year of holding them .

Reducing our holding in some of these tommorow £16467 tax free is acceptable for 22 months imo .

Edited by grey shark

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I see, so it's the month before each year term ends where the RPI actually matters. I thought it would have been at least a yearly average... that's so easily open to manipulation, wish I had known. Thank you.

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Guest absolutezero
I see, so it's the month before each year term ends where the RPI actually matters. I thought it would have been at least a yearly average... that's so easily open to manipulation, wish I had known. Thank you.

The question is: pull out and shove it in a 3% bank account or leave it in?

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I see, so it's the month before each year term ends where the RPI actually matters. I thought it would have been at least a yearly average...

Exactly ....i think many people thought some averaging or smoothing mechanism would be in place , but your years index linked growth depends on RPI on your anniversary .

There was some index linking paying a crap rate { less than .5% IIRC } spring of last year , despite months of 4% RPI , if RPI goes to zero this spring these people will get NO index linking and less than £75 on a 15,000 investment :o

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I am one of those spring buyers :( I will however keep mine in until just for risk aversion and the bonus % will potentially be more than many banks offer if we get 0% base rate.

Am I right in thinking it is a safe haven for a hyperinflation scenario?? Or will RPI be an unreliable measure?

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I am one of those spring buyers :( I will however keep mine in until just for risk aversion and the bonus % will potentially be more than many banks offer if we get 0% base rate.

Am I right in thinking it is a safe haven for a hyperinflation scenario?? Or will RPI be an unreliable measure?

Geniunely sympathise mate , RPI is always unreliable , if we have a hyperinflation scenario it still depends on your anniversary . Am offloading some of ours but will keep the 1.35% there is the safety/tax aspect to think of as well .

You just need to think about it { tax issue , safety }, i think many on here who bought them havn't realised this , in the brochure it carefully mentions what and how RPI is calculated BUT not how it's finally paid out to you ....very devious imo.

Edited by grey shark

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Bought loads of these from March 2007 to November 2007 { in trust etc. }, i always thought that investment grew month by month by whatever the monthly was RPI plus 1/12th of the interest , THIS IS NOT THE CASE example .......

15,000k invested in issue14 on 21st March 2007

Value on 21st March 2008 = £15,745 .....this your first year guarantee it all depended on the March RPI .

Cash in value in January 2009 = £16467 ......now ...... RPI is .9% .......so .......

Cash in value in Febuary 2009 = £16136 .....down £331 because RPI has been manipulated down .

So if RPI goes to zero or negative soon all your get is the 1.15% despite there being months of 4% plus in your year of holding them .

Reducing our holding in some of these tommorow £16467 tax free is acceptable for 22 months imo .

From the terms and conditions I think it's debateable whether you even get the annual bonus if RPI is negative.

see terms and conditions here

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

11. In the event of a decrease in the Retail Prices Index:

(a) any maturity value will never be less than the preceding anniversary value, or, in the case of a Certificate with a term of one year, the purchase price, together with interest at the relevant rate for the period from the preceding anniversary date to the maturity date;

(B) any anniversary value will never be less than the preceding anniversary value or, in the case of the first anniversary, the purchase price, together with interest at the relevant rate for the year.

This says to me that only at the end of first year are you guaranteed the original stake plus the bonus (1.15%, 0.9%), in other years the return will be zero.

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Bought loads of these from March 2007 to November 2007 { in trust etc. }, i always thought that investment grew month by month by whatever the monthly was RPI plus 1/12th of the interest , THIS IS NOT THE CASE example .......

15,000k invested in issue14 on 21st March 2007

Value on 21st March 2008 = £15,745 .....this your first year guarantee it all depended on the March RPI .

Cash in value in January 2009 = £16467 ......now ...... RPI is .9% .......so .......

Cash in value in Febuary 2009 = £16136 .....down £331 because RPI has been manipulated down .

So if RPI goes to zero or negative soon all your get is the 1.15% despite there being months of 4% plus in your year of holding them .

Reducing our holding in some of these tommorow £16467 tax free is acceptable for 22 months imo .

You are right about the month being the most important bit. They use the actual index value rather than the RPI rate and subtract from last years. The basic equation is in the T & C's. For my first year I worked out that I got 5.3% tax free. Not bad. I suppose you want to get a load out when the RPI looks like it is creeping back up and get a nice 1st anniversary amount. Of course timing this is going to be very tricky.

Interesting in the post above about whether you get your 'bonus' or not after the first year. The details are very unclear. Certainly does not spell it out clearly one way or other.

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I too bought into an issue in Spring 2007. I'm assuming that the anniversary in Spring 2008 is guaranteed.

But by this Spring (2009) I guess that RPI will be negative and all we'll get is the margin above RPI.

Is this right? Or will it be that if RPI is -2% I'll end up paying NS&I for looking after my money?

All in all, I'm not that disappointed. I bought the things as a hedge against inflation getting really nasty. They haven't - but I had a bit of cover.

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Bought loads of these from March 2007 to November 2007 { in trust etc. }, i always thought that investment grew month by month by whatever the monthly was RPI plus 1/12th of the interest , THIS IS NOT THE CASE example .......

15,000k invested in issue14 on 21st March 2007

Value on 21st March 2008 = £15,745 .....this your first year guarantee it all depended on the March RPI .

Cash in value in January 2009 = £16467 ......now ...... RPI is .9% .......so .......

Cash in value in Febuary 2009 = £16136 .....down £331 because RPI has been manipulated down .

So if RPI goes to zero or negative soon all your get is the 1.15% despite there being months of 4% plus in your year of holding them .

Reducing our holding in some of these tommorow £16467 tax free is acceptable for 22 months imo .

It's a sorry doo and returns will be poor, index linked for a while but so are returns from any savings product.

I said many months ago that return of savings are more important than return on savings.

That said i today spoke to ns&i and was assured should rpi go to zero or negitive that you will still receive the fixed interest portion year on year in my case 1.35% over 3 or 5 years.

You cant lose money on these indeed they offer deflation protection due to the fixed interest portion.

That plus the tax free status makes them a keep for me.

I would urge anyone with these products to hold tight, temptation might be to clear them out and put where exactly? the stock market...i dont think so...house not yet.

Inflation will return and bite the **** off the unprepaired also the next gov whatever its colour will be forced to find tax income.

Return of savings is better than return on savings.

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It's a sorry doo and returns will be poor, index linked for a while but so are returns from any savings product.

I said many months ago that return of savings are more important than return on savings.

That said i today spoke to ns&i and was assured should rpi go to zero or negitive that you will still receive the fixed interest portion year on year in my case 1.35% over 3 or 5 years.

You cant lose money on these indeed they offer deflation protection due to the fixed interest portion.

That plus the tax free status makes them a keep for me.

I would urge anyone with these products to hold tight, temptation might be to clear them out and put where exactly? the stock market...i dont think so...house not yet.

Inflation will return and bite the **** off the unprepaired also the next gov whatever its colour will be forced to find tax income.

Return of savings is better than return on savings.

I would concur. As long as you still get your money back from these* they could be a decent bet if we get the inflation that some expect in the next few years. The next 6 months are possibly a decent time to pile in. If inflation does kick off these sort of linked certs will be pulled ASAP. If you are locked in for 3 years you could do very well. I remember a thread in the main forum saying when inflation was about 20% in the late 70's, interest rates were about 13%. Anyone confirm ?

Now that would be a very good time to have your savings linked to inflation instead of an account. The same could well happen again. And as you say if deflation does take hold then your cash is holding its value pretty well in these certs too.

Only risk is UKPLC completely collapsing. I am taking that risk. If it happens I will simply turn to crime. :P

* The UK doesn't go completely bust.

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I would concur. As long as you still get your money back from these* they could be a decent bet if we get the inflation that some expect in the next few years. The next 6 months are possibly a decent time to pile in. If inflation does kick off these sort of linked certs will be pulled ASAP. If you are locked in for 3 years you could do very well. I remember a thread in the main forum saying when inflation was about 20% in the late 70's, interest rates were about 13%. Anyone confirm ?

Now that would be a very good time to have your savings linked to inflation instead of an account. The same could well happen again. And as you say if deflation does take hold then your cash is holding its value pretty well in these certs too.

Only risk is UKPLC completely collapsing. I am taking that risk. If it happens I will simply turn to crime. :P

* The UK doesn't go completely bust.

We can only do so much ccc anything could happen if the uk goes bust then so will many others we will have a mad max society and savings will mean for nowt.

gold is unstable and likly to be controled soon aka 1966 style exchange control....... I have my 4 coins!

Others on this forum who play the currency markets may make some money but my bottom line is to have my money in the country I live in again as a student of the 70's I remember the exchange regulations.

I was just starting out in the 70s and yes inflation was up in the teens my first house loan was needing 16% interest!

I and mrs petrodollar worked night day and weekends for 3 years to keep things afloat no holidays no going out just work.

That was 7 houses and 3 mortages ago!

I would be very supprised if 2 years from now we arnt in double digit inflation we are about to repeat the economic situation of my 20's.

I also will be shifting more money to ns&i index.

I will also set some aside for a new shotgun.

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That said i today spoke to ns&i and was assured should rpi go to zero or negitive that you will still receive the fixed interest portion year on year in my case 1.35% over 3 or 5 years.

Thanks for getting clarification on this bit.

To be honest 1.35% after tax is a lot more than than some banks are offering, and it's 100% safe (barring collapse of government), it's jsut not the return it looked like in mid 2007.

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Thanks for getting clarification on this bit.

To be honest 1.35% after tax is a lot more than than some banks are offering, and it's 100% safe (barring collapse of government), it's jsut not the return it looked like in mid 2007.

It's not the collapse of the government you need to worry about (your money would probably be safer if that happened) but the collapse of the country.

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Have decided to hold on to all of them , the bulk we have are at 1.35% first year 2007 - 2008 returns were good , AT THE MOMENT it's not looking so good for 2008 - 2009 but the tax free 1.35% and deflation/inflation arguments and supposed safety make them a hold , also they are now all basically instant access .

In another 12 months it could be a differant story ..................

Edited by grey shark

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I've a bond from over a year ago, does it go down if I don't cash it this month or will it simply not go up by much any more? I don't understand how these work now, I had thought they accrue interest daily at RPI plus whatever the percentage stated at inception...

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I've a bond from over a year ago, does it go down if I don't cash it this month or will it simply not go up by much any more? I don't understand how these work now, I had thought they accrue interest daily at RPI plus whatever the percentage stated at inception...

The RPI is a number published each month by the Office for National Statistics (ONS). The "RPI" you hear on the News is the %age change in this figure from 12 months earlier.

The interest on NS&I Index-linked bonds is "fixed" on every anniversary date, and the rate applied is the %age change in RPI (the "headline" figure) for the previous 12 months (zero if this is negative) + the bonus rate for that year.

The value of the bond will go no lower than the most recent anniversary value.

For partial years, you will always get a pro-rata (monthly) interest payment of the bonus rate for that year. If the RPI has increased since the last anniversary you will also get interest equal to the percentage change in RPI from the last anniversary date to the cash-in date. All interest calculations will be based on the last fixed anniversary amount

This means that if you want to calculate how much you will get if you cash in the bonds between anniversary dates you will need to know the ONS RPI figures for the last anniversary date and the cash-in date. You can find them here. I think that the figures you need are the "CHAW series"

Hope this helps :)

Edit: Link didn't work as expected

Edited by narrowescape

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The RPI is a number published each month by the Office for National Statistics (ONS). The "RPI" you hear on the News is the %age change in this figure from 12 months earlier.

The interest on NS&I Index-linked bonds is "fixed" on every anniversary date, and the rate applied is the %age change in RPI (the "headline" figure) for the previous 12 months (zero if this is negative) + the bonus rate for that year.

The value of the bond will go no lower than the most recent anniversary value.

For partial years, you will always get a pro-rata (monthly) interest payment of the bonus rate for that year. If the RPI has increased since the last anniversary you will also get interest equal to the percentage change in RPI from the last anniversary date to the cash-in date. All interest calculations will be based on the last fixed anniversary amount

This means that if you want to calculate how much you will get if you cash in the bonds between anniversary dates you will need to know the ONS RPI figures for the last anniversary date and the cash-in date. You can find them here. I think that the figures you need are the "CHAW series"

Hope this helps :)

Edit: Link didn't work as expected

Thank you for all that info, it's just the O P said his bonds went down or something like that - confused me! Also, there is a calculator on the NS&I site, does that not do the calculation for me? http://www.nsandi.com/products/ilsc/calculator.jsp

This pdf to check historic rates for each Index Linked issue http://www.nsandi.com/pdf/historic_interest.pdf

edits to add links

Edited by The Last Bear

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Thank you for all that info, it's just the O P said his bonds went down or something like that - confused me! Also, there is a calculator on the NS&I site, does that not do the calculation for me?

Oh yes. I forgot about that. I can always be trusted to over-complicate things :rolleyes:

Still, at least you now know how to work it out for yourself if you really want to :)

To go back to the OP, he is right in that when you track the monthly total, if the ONS RPI number rises then falls rapidly between anniversaries some months may come out lower than earlier months. However, you will always accrue the pro-rata bonus interest whatever happens with RPI, and will "lock in" any gains at each anniversary.

Edit: Too many words!

Edited by narrowescape

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This is what you need. Historical index figures:

RPI STATS

As stated above the anniversary date is most important.

Value = Purchase/Anniversary value + Index Linking + bonus of purchase/anniversary price

Index-linked value will be calculated as V x B/A where:

V='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)

A='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)

B=‘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.

Sorted.

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I think to get a guaranteed 1% tax free even during a deflationary period isn't too bad,because at least you have the insurance if it suddenly turns to 70s inflation.

I enquired about renewing my 34K Bradford and Bingley bond(maturity 11/2)today.Got short shrift from staff and reserving a follow on bond is a thing of the past,I think they just want savings customers to f**k off when they can get it for free from the Government's printing press.Doesn't bode well for the future value of money if they would prefer to lose savers and take the Government's funny money.

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I understand on these that if you cash in after 1st year, best to cash in on an anniversary date or monthly date, else you lose the interest betweeen.

EG

Bought 5 Jan 07

Anniversary 5 Jan 08

Cash in on 5 Jan or 5 Feb or 5 Mar or 5 Apr...

...else I think you don't get the interest for an incomplete month (ie 5th to 5th or 9th to 9th or whatever yours is).

Also, have had a chat with NS&I - seems the value of a Index Linked Cert does not go down, once holder gets interest or whatever it's called on the anniversary date then it's safe. It may not go up by the same amount in Year 2 etc, but they said it doesn't go down from what it becomes on the ann date, eg if £15000 becomes £15500 then it doesn't become <£15500 in Year 2. If you understand differently, chat to NS&I and post here to fill me in.

DISCLAIMER ! Speak with NS&I to verify what I'm saying, I could be wrong!

Edited by The Last Bear

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