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Guest Bart of Darkness

Ns&i Or Not?

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Guest Bart of Darkness

Hi

With some banks/BS offering deals hovering neat the 7% mark, how do NS&I index-linked savings certificates stack up? Does the tax-free statues still give them the edge?

This quote from an earlier thread may answer my own question if the figures still stack up (I personally don't see RPI inflation falling too much over the next few years).

Assuming the RPI remains at its current rate of 4.8% p.a. over the term of the certificates, basic rate taxpayers would need to find a taxable product paying a net rate of 7.68% to match this rate, and higher rate tax-payers similarly 10.25%.

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Hi

With some banks/BS offering deals hovering neat the 7% mark, how do NS&I index-linked savings certificates stack up? Does the tax-free statues still give them the edge?

This quote from an earlier thread may answer my own question if the figures still stack up (I personally don't see RPI inflation falling too much over the next few years).

RPI @ 4.8% makes it a no brainer - invest as much up to the £15k limit. However, RPI went down to 3.4% very rapidly which made it not so attractive for lower-rate tax payers. It is now back up to 4.1%

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Guest Bart of Darkness

I guess it boils down to (a) do you think inflation will rise and (B) do you trust the government to accurately release figures that reflect this.

Personally I'd agree with (a) but am not sure about (B). Although RPI is surely harder to fudge, hence the emphasis on CPI?

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I guess it boils down to (a) do you think inflation will rise and (B) do you trust the government to accurately release figures that reflect this.

Personally I'd agree with (a) but am not sure about (B). Although RPI is surely harder to fudge, hence the emphasis on CPI?

As far as I've learned the RPI has been dicked around with much less than the CPI over the years. As well as that, the fact that mortgage interest payments are included in the RPI - the culling or huge rate increases on the sub-primers and the 2 year fixed rate resets happening right now! should drive the RPI up.

Anyway, let's have a dig:

http://www.statistics.gov.uk/cci/article.asp?id=1746

Looking at the historical weighting changes for the RPI, most of the sector weightings have been largely unmessed with, barring the following:

Food in 2007 is down 20% from it's 1997 weighting level, although to be fair it's been decreasing steadily since 1987. And it's hard to argue that certain food products (meat inparticular) aren't incredibly cheap compared to the past. Although this year various staples such as dairy, bread and flour-based products have been rocketing, so all things being fair the weighting should be increased when the indexes are readjusted in February next year to reflect this year's increased expenditure on food.

Clothing is down a bit but I think we can safely blame China for that.

Two things I take exception with though are motoring costs - and fares and other travel costs. Both are completely flat. I have no idea what prices for rail passes or petrol were back in 1987 (or even 1997) but I find it very hard to believe that they don't take up more of someone's expenditure than they did 10 years ago.

So we should see RPI rising... It'd take some serious messing to keep the rising costs of flour and mortgage payments out. Sorry for the rambling, but I find it helps me keep things straight in my head if I stop and think and type stuff up. Hope it helps, anyway.

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Guest Bart of Darkness
Sorry for the rambling, but I find it helps me keep things straight in my head if I stop and think and type stuff up. Hope it helps, anyway.

Ramble away christh, it's all useful stuff to know.

Thanks to both you and Tonester for your replies, I think NS&I is the one for me, at least for part of my dosh.

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Ramble away christh, it's all useful stuff to know.

Thanks to both you and Tonester for your replies, I think NS&I is the one for me, at least for part of my dosh.

I should give it a go. But not before filling up on your full allocation of premium bonds, which is more fun (with cheques hopefuly coming through the door monthly). This "guaranteed" RPI proof investment, with tax free, is too good to pass up inthe current enviornment!

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Can anyone comment on whether these bonds use RPI or RPIX for the index linking component?

I seem to remember it's RPIX, which is the main reason I have not yet invested in them - the return then becomes comparable to a high interest savings account (assuming RPIX @2.5%)

Looking at the terms on ns&I's website, it's not clear which index they use.

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Guest Bart of Darkness
Can anyone comment on whether these bonds use RPI or RPIX for the index linking component?

I seem to remember it's RPIX, which is the main reason I have not yet invested in them - the return then becomes comparable to a high interest savings account (assuming RPIX @2.5%)

Looking at the terms on ns&I's website, it's not clear which index they use.

Had a look at the page on the index linked certificates and it says "Index-linking to Retail Prices Index (RPI) plus guaranteed interest on top."

Used Search to look for RPIX but it came up with no matches.

From their financial jargon page it says:

RPI (Retail Prices Index) — the most frequently used measure of inflation, calculated by the Office for National Statistics each month.

Seems pretty clear but as a seasoned HPC'er, I've learned to take nothing for granted. ;)

I've sent them an email enquiry via their feedback form, just to be 100%.

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You can invest personally up to £15,000 in each of the three-year and five-year NS&I Index-linked certificates. If you have a spouse (not sure about partners) then you can each be trustee for the other and purchase further certificates, again for both issues. So £120,000 altogether is possible for a couple.

This whole opportunity is repeatable each time the issues are replaced, usually two or three times per year.

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Guest Bart of Darkness

Had a reply to my query today (Sunday!)

Thank you for your enquiry Mr XXXXX

I can confirm that we use the RPI and not the RPIX figures.

Regards

XXXXXXXXXX

NS&I Blackpool

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