Jump to content
House Price Crash Forum
Sign in to follow this  
grey shark

Nsi Index Linked Saving Certs

Recommended Posts

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!

Yeah I think that is made clear in their gumph. You get a base so in a deflationary environment the value will increase. In an inflationary environment it should do ok. Yes it will lose value due to the idnexes being pretty pish. However probably better than in a simple saving high interest account.

I can see the Government (BOE) deciding to keep interest rates fairly low (<10%) even if inflation kicks off. 'Unprecendented times' etc.. will be used as an excuse.

I can see savings rates at 5% and RPI at 10%. Of course who knows...

Share this post


Link to post
Share on other sites
Yeah I think that is made clear in their gumph. You get a base so in a deflationary environment the value will increase. In an inflationary environment it should do ok. Yes it will lose value due to the idnexes being pretty pish. However probably better than in a simple saving high interest account.

I can see the Government (BOE) deciding to keep interest rates fairly low (<10%) even if inflation kicks off. 'Unprecendented times' etc.. will be used as an excuse.

I can see savings rates at 5% and RPI at 10%. Of course who knows...

Can you buy these at any time or are there set points through the year at which they are issued?

Share this post


Link to post
Share on other sites

you can go out and buy the 3 year and 5 year today. thats £30k. and another £30k in your partners name if you have one.

ive £90k in these, been buying the last three issues (except the joke one they had out for a few weeks,) , including 60k in the most recent issue - £30k me, £30k girlfriend

a good hedge against inflation if you ask me.

thinking about index-linked gilts now.................

Share this post


Link to post
Share on other sites

Given that the actual index - that forms the basis of RPI - has actually fallen then surely it makes sense to cash out existing certificates bought recently (i.e since september) and re-buy them at a lower rate (ie. today's index) ?

http://www.statistics.gov.uk/downloads/the...conomy/RP02.pdf

have I missed something ?

Edited by deaglecat

Share this post


Link to post
Share on other sites

In light of this thread, I think I may have misunderstood how these work.

I believed that the interest was calculated month-by-month based upon the published RPI figures (plus some bonus which varies between issues). Of course, the certificate has to be kept for at least one year in order to qualify for any interest at all, but I assumed that this didn't stop the interest (in principle) being worked out month-by-month.

Here's an example of what I thought was going on, using a certificate originally taken out a year ago, and assuming (for the sake of argument) a bonus of +1%:

£15,000 invested on 01/Feb/2008.

Feb '08 RPI: 4.1% + 1% = 5.1% / 12 = 0.425%

£15,000 x 0.425% = £63.75 (interest earned for Feb '08).

Mar '08 RPI: 3.8% + 1% = 4.8% / 12 = 0.4%

£15,000 x 0.4% = £60 (interest earned for Mar '08).

... and so on.

From the posts so far in this thread, this doesn't seem to be the way these things work.

Can anyone quote the bit in the T&Cs that specifically says how interest is calculated, and which RPI figure(s) is/are used?

Share this post


Link to post
Share on other sites
Post # 22.. :rolleyes:

Yes, thank you! :)

Sorry for being a bit slow, but after believing I already understood these things, changing one's view can be a bit like turning a bus around! ;)

I think I've got it now...

The root of the problem was that I didn't fully understand how the monthly RPI %age figures were calculated. Now that I think I do understand them, I realise we're in deeper trouble than I thought! We've been in deflationary territory since last September or thereabouts, where I'd previously thought we were only just now (i.e. February) on the cusp of deflation... :o

Share this post


Link to post
Share on other sites
Yes, thank you! :)

Sorry for being a bit slow, but after believing I already understood these things, changing one's view can be a bit like turning a bus around! ;)

I think I've got it now...

The root of the problem was that I didn't fully understand how the monthly RPI %age figures were calculated. Now that I think I do understand them, I realise we're in deeper trouble than I thought! We've been in deflationary territory since last September or thereabouts, where I'd previously thought we were only just now (i.e. February) on the cusp of deflation... :o

I think most people, myself included, thought these were based on th emonthly figures as you say. However we all should have read the small print !! Anyway it is still a decent deal I reckon.

I dont see how we are in deflationary territory from September ? The YoY RPI index is still positive. I think.

Share this post


Link to post
Share on other sites
I dont see how we are in deflationary territory from September ? The YoY RPI index is still positive. I think.

Yes, at least up until Dec '08, the YoY RPI %age change is positive, but the index has been falling since September. We only still have the impression of inflation (rather than deflation) up to Dec '08 because of the inflation that occurred from Dec '07 to Sep '08...

Share this post


Link to post
Share on other sites

Impartial view from stockbrokers Hargreaves Lansdowne ..........

Inflation falling, bad news for Index Linked certificates?

By Danny Cox | 15 Jan, 2009

A client asked this week whether they should cash in their National Savings Index Linked certificates. Seeing the returns falling on his statements, quite rightly, he queried whether he should keep them.

Index Linked Certificates pay tax free interest monthly, based on the rate of inflation as measured by the Retail Price Index plus a fixed interest rate. The current 3 and 5 year certificates are paying RPI plus 1%.

RPI fell to 3% in December meaning that investors would receive 4% tax free, a very good rate on a cash investment, however further falls are expected.

If RPI fell to zero or even became negative (the dreaded deflation), Index Linked certificates will continue to receive at least the ‘plus 1%’. For a higher rate tax payer with a 1% plus RPI certificate they would have to be getting a return of 1.66% from a taxable investment to provide them with an equivalent return. In the current environment, these certificates don’t offer a bad return, but you would lose some of that interest if you cashed it in early and you wouldn't receive any interest at all if you cash in within the first year.

Inflation will increase again in future, although perhaps not for 12 months or more, but when it does these certificates will look like a good buy again. If you are an existing investor, over their full term, they should look good value.

It is important to add that these are government backed assets, which would often be an overriding reason to hold them. Potentially, if taxes do rise, as widely predicted, the tax efficiency of these products could make them even more valuable.

This suggests to me that if you already have index linked certificates, I would be inclined to hold onto them, but I probably wouldn’t suggest buying a new one at the moment, unless for a higher rate tax payer, where capital security was paramount.

http://www.h-l.co.uk/news/Expert-comment/a...2447/rq/article

Share this post


Link to post
Share on other sites
Impartial view from stockbrokers Hargreaves Lansdowne ..........

http://www.h-l.co.uk/news/Expert-comment/a...2447/rq/article

Anyone taking their advice would be mad. They don't even understand how the interest is worked out !! Unless I have misunderstood ?

Their understanding of how it is worked out is totally incorrect. I think. :blink:

Share this post


Link to post
Share on other sites
Anyone taking their advice would be mad. They don't even understand how the interest is worked out !! Unless I have misunderstood ?

Their understanding of how it is worked out is totally incorrect. I think. :blink:

Looks like they worked out the interest correctly to me ccc , in the current climate these are defo a HOLD imo .

for anyone who missed it and who may be interested there was a thread about these certs on the main board yesterday....

http://www.housepricecrash.co.uk/forum/ind...06836&st=15

also.......... http://news.bbc.co.uk/1/hi/business/7923106.stm

Share this post


Link to post
Share on other sites

Grey Shark:

"Index Linked Certificates pay tax free interest monthly, based on the rate of inflation as measured by the Retail Price Index plus a fixed interest rate. The current 3 and 5 year certificates are paying RPI plus 1%.

RPI fell to 3% in December meaning that investors would receive 4% tax free, a very good rate on a cash investment, however further falls are expected."

Arent the above 2 points wrong or at least vague ?

The first is clearly vague at least. Interest is calculated annually on the anniversary. I know if you redeem early you get it worked out monthly for each full month following the pervious anniversary. However the above would indicate to most people you get this calculated on the monthly RPI figure. Misleading at least.

As for the second it fails to point out you would have to have purchased this cert in December to be getting this rate. That should really be explained in detail.

Share this post


Link to post
Share on other sites

BTW I am a big holder too and I am sticking even though this year I will just get the bonus for most.

My only fear for them is that they are guaranteed by the Treasury. I don't really trust them to much !! :(

Share this post


Link to post
Share on other sites
"Index Linked Certificates pay tax free interest monthly, based on the rate of inflation as measured by the Retail Price Index plus a fixed interest rate. The current 3 and 5 year certificates are paying RPI plus 1%.

RPI fell to 3% in December meaning that investors would receive 4% tax free, a very good rate on a cash investment, however further falls are expected."

Arent the above 2 points wrong or at least vague ?

The first is clearly vague at least. Interest is calculated annually on the anniversary. I know if you redeem early you get it worked out monthly for each full month following the pervious anniversary. However the above would indicate to most people you get this calculated on the monthly RPI figure. Misleading at least.

As for the second it fails to point out you would have to have purchased this cert in December to be getting this rate. That should really be explained in detail.

The first point does suggest you get RPI monthly with the fixed interest ....looks like even the experts get it wrong :rolleyes:

Second point it should of said if you bought the cert the previous December or that December was your anniversary month from previous years .

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 295 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.