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bumpy

Ns&i Calculation

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In the NS&I terms and conditions (section 15) it gives the following calculation for your interest.

Value of certificate at end of year is V x B/A

Where

V = starting value

B = RPI at end

A = RPI at start

So if the year starts with 5% RPI and ends with 5% RPI then I make it they pay you V x 1 which is no index linked value at all.

What am I doing wrong.

Edited by bumpy

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You should be using the actual RPI numbers (based on 100 in Jan 1987)

from http://www.statistics.gov.uk/downloads/theme_economy/rp02.pdf

e.g March 2010 to March 2011 is 232.5/220.7 which gives 1.053, (5.3% inflation) for the year

Perfect answer. Thanks very much.

FIO I spent 20 mins waiting on the NSI phone line, then they could not explain it in the way you did and told me to write in. Idiots

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I think a few people are still confused by this issue looking at other forums :

Take this scenario:

I take out a certificate and RPI is 5% when i take it out. Exactly twelve months later RPI has dropped to 3%.

Do i now only receive 0.5% as the level of RPI has dropped ---- or do i receive additional interest as though

it has dropped it is still up 3% year-on-year.

The answer to this would make the situation clear i think.

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RPI isn't 5% or 3%, increase in RPI is 5% and 3% in that example.

Say the RPI index was 100 in January 2011 and 103 in Jan 2012. Increase in RPI is 3%. Using the formula in the first post assuming £100 invested.

£100 x (103/100) = £100 x 1.03 = £103

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I think a few people are still confused by this issue looking at other forums :

Take this scenario:

I take out a certificate and RPI is 5% when i take it out. Exactly twelve months later RPI has dropped to 3%.

Do i now only receive 0.5% as the level of RPI has dropped ---- or do i receive additional interest as though

it has dropped it is still up 3% year-on-year.

The answer to this would make the situation clear i think.

I think people get mixed up between RPI and inflation. RPI stands for Retail-Prices Index and not Retail-Price Inflation. It is NOT measured as a percentage, but as a continuous weighted-average number which goes up if prices have risen, stays the same if prices are unchanged, and goes down if prices are lower. It is a measure of inflation in prices, but is not in itself inflation.

NS&I Index-linkers pay the PERCENTAGE CHANGE in the RETAIL-PRICES INDEX over the previous year OR ZERO PERCENT (whichever is greater), + the small bonus for that year.

When people say RPI is 5% they should really be saying the CHANGE in the RPI, as RPI is just a number like the FTSE for example, and is not a percentage!

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I think a few people are still confused by this issue looking at other forums :

Take this scenario:

I take out a certificate and RPI is 5% when i take it out. Exactly twelve months later RPI has dropped to 3%.

Do i now only receive 0.5% as the level of RPI has dropped ---- or do i receive additional interest as though

it has dropped it is still up 3% year-on-year.

The answer to this would make the situation clear i think.

You'd get a total of 3.5%

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http://www.devon.gov.../economyrpi.htm

2011 229.0

2010 217.9ok, its like this you open the index link account 1 jan 2010 you get paid interest base on the difference between jan 2010 and jan 2011

so (229.0/217.9) * you investment=1.0509* investment plus .85. the question, or you can do it like this (229.0-217.9)/ 217.9 = .0509

Edited by crash2006

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You'd get a total of 3.5%

No, you could get 4.9% +.05 it counts all the months not just the start or end. but its calculated differently that's all, its almost like take the average inflation rate for that year.

to get 3.5% payment you would need start month to be 5% 3 months at 3% and 8 months at 3.5% to get 3.5%.

Edited by crash2006

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In the NS&I terms and conditions (section 15) it gives the following calculation for your interest.

Value of certificate at end of year is V x B/A

Where

V = starting value

B = RPI at end

A = RPI at start

So if the year starts with 5% RPI and ends with 5% RPI then I make it they pay you V x 1 which is no index linked value at all.

What am I doing wrong.

it depends, if jan01 =5% and jan 02 = 5% but feb to dec = 6% you'd get 5.9%.

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