Ns&i Indexed Link Savings

[Confounded]

Mods I appreciate this should be in the investments and savings section but I know many HPC'er have these so I would appreciate if this can be kept on the main board for a bit.

I have both 3 and 5 year Indexed link savings with the NS&I. Just had an interesting and disappointing phone conversations.

As was discussed on these boards a few years ago they seemed the perfect product to cash in on the mini inflation spike last year and if RPI then went to zero you could still get 1.35% tax free. Well just got a valuation of my certificates that I knew you could cash in early if necessary so long as it was after a year. If I had cashed them in August last year after their 1st anniversary it would have been worth exactly the same as what it is now. So I thought maybe I need to keep it to the next anniversary and Waite for the valuation then. I was told that if RPI remains low then it is possible the valuation will not change.

I can not see how this can be with the upfront terms of RPI + 1.35%, I am not sure if the advisor I spoke to knew the detail well enough but I did say given RPI was still relatively high the tail end of last year I should at least have gained for those months and then only get 1.35% for the remaing 5 months to it's next anniversary. She insisted that this was not the case and it was still possible with very low RPI that you would not receive anything for the whole year.

I know many on here have invested in these and just wanted to flag up what sound like a possible small print con.

Does anyone have the terms and conditions and understand the way they calculate these certificates?

[CharlieChuck]

There's a few threads about this in the Savings sub forum. The terms and conditions are unclear either way (to my reading), but someone else had confirmation from NS&I that you are guaranteed to get the bonus 1.35% (or whatever) at the very least.

[Timm]

Have you had anything in writing?

[Confounded]

Have you had anything in writing?

No they said I could write to the calculations team if I wanted an explanation, I have asked for the terms and conditions but thought I would flag it up here as I know many people took these out and there may be somone who has already discovered this potential con.

[Confounded]

There's a few threads about this in the Savings sub forum. The terms and conditions are unclear either way (to my reading), but someone else had confirmation from NS&I that you are guaranteed to get the bonus 1.35% (or whatever) at the very least.

Thanks CharlieChuck, are yes top of the Saving and Investing section! Wont hurt to have this on the main board for a bit though as many don't go much past the main forum.

[thecrashingisles]

The bonus is less for the first year and increases each year.

The spreasheet here suggest that £100 purchased in August 2007 is now £105.68 on the 3 year bond - http://www.nsandi.com/products/ilsc/calculator.jsp

Edited March 4, 2009 by thecrashingisles

[Confounded]

The bonus is less for the first year and increases each year.

The spreasheet here suggest that £100 purchased in August 2007 is now £105.68 on the 3 year bond - http://www.nsandi.com/products/ilsc/calculator.jsp

Cheers

[dr ray]

You get the additional % whatever the RPI is so if RPI is -10 you still get +1.35 or whatever if you hold to maturity. There is a sliding scale if you cash early.

If RPI is +ve you only get the RPI on anniversery date. So lets say you bought last April and suffer ed a year of RPI at near 5% but RPI is 0% when you cash in next April, the RPI is calculated as 0%. It could work in savers favour if they buy now as the abolition of the VAT cut next year will cause a one off increase RPI

[bomberbrown]

HANG ABOUT!!! This might explain why the calculator doesn't work the way I expected.

Are you/they saying that the RPI amount they base the interest on is FIXED for the year at the figure RPI was the day the bond started? I always thought that the monthly interest was worked out on what ever the figure for RPI was that month.

So is it fixed RPI figure for each anniversary date for the following year?

Hope this make sense.

[yameesh]

I think the terms and conditions refer to RPI the INDEX LEVEL (not yoy % return) and your return is based on increase of this level vs your purchase date (/last anniversary date).

note recent index levels:

jan08 209.8

feb08 211.4

mar08 212.1

apr08 214

may08 215

jun08 216.8

jul08 216.5

aug08 217.2

sep08 218.4

oct08 217.7

nov08 216

dec08 212.9

jan09 210.1

=> hence no RPI return even if you bought a year ago

[bomberbrown]

I think the terms and conditions refer to RPI the INDEX LEVEL (not yoy % return) and your return is based on increase of this level vs your purchase date (/last anniversary date).

note recent index levels:

jan08 209.8

feb08 211.4

mar08 212.1

apr08 214

may08 215

jun08 216.8

jul08 216.5

aug08 217.2

sep08 218.4

oct08 217.7

nov08 216

dec08 212.9

jan09 210.1

=> hence no RPI return even if you bought a year ago

I don't understand those indice's like these ones.

http://www.statistics.gov.uk/downloads/the...conomy/RP04.pdf

[Confounded]

I think the terms and conditions refer to RPI the INDEX LEVEL (not yoy % return) and your return is based on increase of this level vs your purchase date (/last anniversary date).

note recent index levels:

jan08 209.8

feb08 211.4

mar08 212.1

apr08 214

may08 215

jun08 216.8

jul08 216.5

aug08 217.2

sep08 218.4

oct08 217.7

nov08 216

dec08 212.9

jan09 210.1

=> hence no RPI return even if you bought a year ago

Thanks for the post, this what I did not understand and think many would have misunderstood. The view i took from them is you would get RPI +Bonus, because RPI is monthly I assumed your savings would be calculated monthly. It turns out it is a very misleading product which is what I wanted to highlight with this post.

[Unexpected]

Thanks for the post, this what I did not understand and think many would have misunderstood. The view i took from them is you would get RPI +Bonus, because RPI is monthly I assumed your savings would be calculated monthly. It turns out it is a very misleading product which is what I wanted to highlight with this post.

Thanks for highlighting this. I was also under the same impression as you.

Based on this information I would not buy any more.

[bomberbrown]

Thanks for highlighting this. I was also under the same impression as you.

Based on this information I would not buy any more.

Well, I'm still confused. Please can someone simplify?

[grey shark]

Thanks for the post, this what I did not understand and think many would have misunderstood. The view i took from them is you would get RPI +Bonus, because RPI is monthly I assumed your savings would be calculated monthly. It turns out it is a very misleading product which is what I wanted to highlight with this post.

Yeah this is exactly my thoughts on it to , funny you should put this thread up as i read a article last night and pasted it on this thread ......................

http://www.housepricecrash.co.uk/forum/ind...hp?showforum=49

We are holding on to all of them , as they are now at least instant access with the growth , first year returns were good , second year returns were poor , so it's basically averaged itself out , we are holding on to them and there are the tax , tax credits and safety issues to consider as well .... defo a HOLD for us at the mo .

Edited March 4, 2009 by grey shark

[CharlieChuck]

Well, I'm still confused. Please can someone simplify?

Take the RPI index at purchase date, forward a year, the years return is (todays RPI index - 1 year ago's RPI index ) / 1 year ago's RPI.

If you bought Jan 08, the return is 0.1% plus the bonus 1.3% (the bonus depends on what issue )

You've still beaten RPI inflation (which is what the point of these bonds are) but it's not outstanding returns.

[dr ray]

Well, I'm still confused. Please can someone simplify?

You were almost right in your previous post but the index RPI rate is not the day you bought them but the aniversery - one year later.

I was stitched up too but now may not be the time to stop buying because as inflation picks up (which everyone thinks it will over 3 or 5 years) this should work in our favour. For a 40% taxpayer 1% tax free (assuming -ve or 0 RPI) is worth 1.6% taxed interest which can be improved on but not outrageous at present for government backed savings once the 50K limit on BS accounts is reached.

Also any tax free income will be more valuable as taxes are bound to rise.

[jimbo1968]

The only thing that could make this thread funnier, would be if it turned out the bonus was 1.35% over 3 years and not annually.

[markyh]

There's a few threads about this in the Savings sub forum. The terms and conditions are unclear either way (to my reading), but someone else had confirmation from NS&I that you are guaranteed to get the bonus 1.35% (or whatever) at the very least.

I will let you all know in the next few weeks. i have just posted off to cash my £30k for my house purchase soon. bought 15th and 42nd issue max £15k on 9/3/08 and set to form to cash them in on 10/3/09, one year and one day to make sure i get the first years interest.

When I see what i get back in my bank account around the 17th I will work out the annual % growth for each an post here. That should settle the disagreements.

M

Edited March 4, 2009 by markyh

[CharlieChuck]

I will let you all know in the next few weeks. i have just posted off to cash my £30k for my house purchase soon. bought 15th and 42nd issue max £15k on 9/3/08 and set to form to cash them in on 10/3/09, one year and one day to make sure i get the first years interest.

When I see what i get back in my bank account around the 17th I will work out the annual % growth for each an post here. That should settle the disagreements.

M

There's also a calculator on the NS&I website, any chance you could use the calculator and see if the actual return you get is the same?

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

[GregG]

Apologies if already posted otherwise relevant

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

[bomberbrown]

Take the RPI index at purchase date, forward a year, the years return is (todays RPI index - 1 year ago's RPI index ) / 1 year ago's RPI.

If you bought Jan 08, the return is 0.1% plus the bonus 1.3% (the bonus depends on what issue )

You've still beaten RPI inflation (which is what the point of these bonds are) but it's not outstanding returns.

Cheers Charlie, but I still don't get it. I've looked at the T&C too.

16. An index-linked value will be calculated as V x B/A where:

(a) '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' 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); and

© ‘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.

Take the 15th issue and an investment of £15k (3 year) as an example (it's actually mine). 15th issue is RPI + 1.35%

Purchase date = May 2007 when RPI is 4.3

First anniversary = May 2008 when RPI is 4.3 again

Current value from the calculator = £15,753

How do you/they arrive at this figure? Really appreciate a working out, so I can understand it better and make an informed choice as to what month to get them out. I checked the calculator a while back and I'm sure the value was over £16k!!!! :angry:

[Injin]

Just mail it to Gordon now, it'll save a lot of heartache.

[markyh]

There's also a calculator on the NS&I website, any chance you could use the calculator and see if the actual return you get is the same?

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

Yep it looks like weve all been duped. Says i will get £15186 on the three year and £15163.50 on the five year. I was hoping to get around 4% to 4.5% average tax free over the year, somewhere around £1200 on £30k but looks like most people I misunderstood the way the calculate too.

I also assumed the took each months RPI figure and added the 1%+ bonus from the date you invested and worked it out monthly over the year and paid out the total. As RPI had been 4%+ monthly since March to November, and dipped slightly in December only going to shit in Jan / Feb / march 09 I assumed it might average out at about 4%ish with bonus for the year I have invested. Looks like we were wrong So i will be down £850.

Hey ho......still the £100k saving on the 2007/08 price of the house im buyibg makes up for it. you cant win em all.

I wonder what return i would have got if RPI was still 4%+ in Jan / Feb / March 09? any boffins who can work it out?

M

Edited March 4, 2009 by markyh

[CharlieChuck]

Cheers Charlie, but I still don't get it. I've looked at the T&C too.

Take the 15th issue and an investment of £15k (3 year) as an example (it's actually mine). 15th issue is RPI + 1.35%

Purchase date = May 2007 when RPI is 4.3

First anniversary = May 2008 when RPI is 4.3 again

Current value from the calculator = £15,753

How do you/they arrive at this figure? Really appreciate a working out, so I can understand it better and make an informed choice as to what month to get them out. I checked the calculator a while back and I'm sure the value was over £16k!!!! :angry:

Forgot the annual RPI rate that is generally quoted, it's irrelevant, what you need to look at is the RPI index for the specific month you bought it, and the anniversary dates.

After the first year you would have got 4.3% plus a bonus (it may be less than 1.35% as the 1.35% quoted is an average of the bonuses, the bonuses tend to increase so it will be something like 1% first year, second year 1.35% 3rd year 1.7% or whatever)

assume 1% for bonus, the gain at may 08 would be 5.3% £15,795 - which is close to the figure

Since May 08, the RPI index has risen then fallen and is now below the level it was in may last year, so there is no extra indexing since the last anniversary. The current value now is the same as it was last May. (index May-08 215, now 210.1)

I'm not 100% sure the online calculator is exactly right, which is why I asked Markyh to check what he get's back vs. the calculator

edit to add: I also checked the online calc last year sometime and it was about 16,000 now it's about 15,800 but it hasn't fallen the past few months.

Edited March 4, 2009 by CharlieChuck