National savings
Discussion
I have money in various Halifax accounts with variable intrests rates which have now plunged to less than 1% -therefore i am tempted to stick the whole lot into National savings RPI 5 year issue
I have used my ISA allowances and i don't need quick access to money.But what i want to know is what are the disadvantages of National savings RPI??
I have used my ISA allowances and i don't need quick access to money.But what i want to know is what are the disadvantages of National savings RPI??
Access to the money is pretty quick if you need it. The extra interest rate (the 1%) is tiered so you don't get it if you pull out within the first year. Do you want the full 5yr or do you want 3yr terms? Both are available. Max £15k in each, usually a new issue of each every year. Though RPI was negative a year ago, you won't get less (in the current 20th issue (3yr) or 47th issue (5yr)) than 0 + 1% and, of course it is tax-free. Currently RPI is 5.1% so with 1% on top a higher rate taxpayer is getting the equivalent of about 10% gross. Even if RPI drops you'll still be earning above the rate of inflation (or deflation). When RPI was negative the building societies were offering about 3% taxable - so you wouldn't have been doing that much worse at 1% tax-free, and by comparison with current building society rates, nearly 10% gross is very attractive. Graphs of CPI & RPI here http://www.statistics.gov.uk/cci/nugget.asp?id=19
Over the last 61 years RPI can be seen here http://www.statistics.gov.uk/statbase/tsdataset.as... - note that in 1975 it was 24%! Apart from 2009 (minus 0.5%), it has been between 1.5 and 4.3% over the last decade. The extra above RPI varies with different certificates - it can be as low as 0.25% I think, though the rate is fixed for each certificate.
For a maximum holding of £15k in the then-current certificates bought at the following times, the current value would be:
3yr Sept 07 17124
3yr Apr 08 15390
3yr May 08 16084
3yr Jul 08 16039
etc etc
For 5yr terms
5yr Sept 07 17032 etc
The rates are different because 1) different bonus % above RPI, 2) timing and RPI since, 3) point in the tiering of interest - a 5yr bond bought in 07 will still be in the 3rd of 5yr tier of added interest, whereas the 3yr one bought at the same time is in the final year and about to mature..
If you are planning NS&I for unexciting but safe long term saving, remember that you can reinvest the mature certificates once (only) in the then-current issue without affecting the £15k limit for that issue...worth knowing if you've got £30k p.a. to put into them that is.
Nomis (AKA the forum NS&I bore).
Over the last 61 years RPI can be seen here http://www.statistics.gov.uk/statbase/tsdataset.as... - note that in 1975 it was 24%! Apart from 2009 (minus 0.5%), it has been between 1.5 and 4.3% over the last decade. The extra above RPI varies with different certificates - it can be as low as 0.25% I think, though the rate is fixed for each certificate.
For a maximum holding of £15k in the then-current certificates bought at the following times, the current value would be:
3yr Sept 07 17124
3yr Apr 08 15390
3yr May 08 16084
3yr Jul 08 16039
etc etc
For 5yr terms
5yr Sept 07 17032 etc
The rates are different because 1) different bonus % above RPI, 2) timing and RPI since, 3) point in the tiering of interest - a 5yr bond bought in 07 will still be in the 3rd of 5yr tier of added interest, whereas the 3yr one bought at the same time is in the final year and about to mature..
If you are planning NS&I for unexciting but safe long term saving, remember that you can reinvest the mature certificates once (only) in the then-current issue without affecting the £15k limit for that issue...worth knowing if you've got £30k p.a. to put into them that is.
Nomis (AKA the forum NS&I bore).
Edited by nomisesor on Monday 28th June 19:57
Edited by nomisesor on Monday 28th June 19:58
Edited by nomisesor on Monday 28th June 20:01
tali1 said:
If RPI fell i suppose i would still be better off than crappy Halifax under 1% savings account?
Umm - you decide....! The current 3 & 5yr issues won't fall below 1% net (equivalent to 1.25% or 1.67% gross for lower and higher rate taxpayers) even if RPI drops to zero or negative. Currently they pay 6.1 % net - equivalent to 7.625% gross for a 20% taxpayer, 10.2% for a 40%, 12.2% for a 50% taxpayer.
Yeah sounds like a good deal if you can tie it up for 3-5 years.
Santander rang me yesterday begging me to come in for a meeting to discuss invesments. I have a small fixed term bond maturing.
I said there was no point and I wasnt interested in wasting my day. However the guy said they would get an investment advisor to call me to discuss after work one evening, so I thought ok, lets see how that goes. It will be interesting to see if they can beat the guaranteed returns from the tax free index tracked NS and I bonds. Im 100% sure they cant and it will be a waste of my time.
Im guessing the news today that Spanish banks are panicing because of the ECB removing its extraordinary liquidity program has something to do with it.
Santander rang me yesterday begging me to come in for a meeting to discuss invesments. I have a small fixed term bond maturing.
I said there was no point and I wasnt interested in wasting my day. However the guy said they would get an investment advisor to call me to discuss after work one evening, so I thought ok, lets see how that goes. It will be interesting to see if they can beat the guaranteed returns from the tax free index tracked NS and I bonds. Im 100% sure they cant and it will be a waste of my time.
Im guessing the news today that Spanish banks are panicing because of the ECB removing its extraordinary liquidity program has something to do with it.
tali1 said:
One thing that slightly put me off was that traditionally NSandI don't/didn't have the best intrest rates -they are less competitive than Banks /Building Societies- but i may be totally wrong on that ?
Ha - got me twice but both legs now equally pulled, I'll leave it at that! In the current climate of the Base rate way below RPI, as a higher rate taxpayer, the NS&I 3yr Index-Linked bond is a very good product IMO. Better than any ISA if you're prepared to tie up money for a few years.
So good infact, i'm pumping cash into them rather than overpaying on my mortgage.
So good infact, i'm pumping cash into them rather than overpaying on my mortgage.
They've been pulled....
NS&I, the government backed savings institution, has withdrawn its savings certificates from sale and reduced the rates on other products in a blow to savers struggling to make a return above inflation.
Higher than anticipated inflation, continued low interest rates and the desire to avoid risky investments at a time of market volatility and continued uncertainty over the health of Britain’s banks has boosted the attraction of NS&I's inflation beating and 100% guaranteed products.
NS&I, the government backed savings institution, has withdrawn its savings certificates from sale and reduced the rates on other products in a blow to savers struggling to make a return above inflation.
Higher than anticipated inflation, continued low interest rates and the desire to avoid risky investments at a time of market volatility and continued uncertainty over the health of Britain’s banks has boosted the attraction of NS&I's inflation beating and 100% guaranteed products.
macca said:
They've been pulled....
NS&I, the government backed savings institution, has withdrawn its savings certificates from sale and reduced the rates on other products in a blow to savers struggling to make a return above inflation.
Higher than anticipated inflation, continued low interest rates and the desire to avoid risky investments at a time of market volatility and continued uncertainty over the health of Britain’s banks has boosted the attraction of NS&I's inflation beating and 100% guaranteed products.
Jeez -that was close! as i managed to put another deposit in to make my full allowanceNS&I, the government backed savings institution, has withdrawn its savings certificates from sale and reduced the rates on other products in a blow to savers struggling to make a return above inflation.
Higher than anticipated inflation, continued low interest rates and the desire to avoid risky investments at a time of market volatility and continued uncertainty over the health of Britain’s banks has boosted the attraction of NS&I's inflation beating and 100% guaranteed products.
Staggering
The combination of Brown's raid on pension schemes, Con-Lib cutting pension increases from RPI to CPI, very low base rate and the end of National Savings Certificates really punish anyone trying to save for retirement.
Wonder what remaining life expectancy there is for the ISA regime?
The combination of Brown's raid on pension schemes, Con-Lib cutting pension increases from RPI to CPI, very low base rate and the end of National Savings Certificates really punish anyone trying to save for retirement.
Wonder what remaining life expectancy there is for the ISA regime?
tali1 said:
macca said:
They've been pulled....
NS&I, the government backed savings institution, has withdrawn its savings certificates from sale and reduced the rates on other products in a blow to savers struggling to make a return above inflation.
Higher than anticipated inflation, continued low interest rates and the desire to avoid risky investments at a time of market volatility and continued uncertainty over the health of Britain’s banks has boosted the attraction of NS&I's inflation beating and 100% guaranteed products.
Jeez -that was close! as i managed to put another deposit in to make my full allowanceNS&I, the government backed savings institution, has withdrawn its savings certificates from sale and reduced the rates on other products in a blow to savers struggling to make a return above inflation.
Higher than anticipated inflation, continued low interest rates and the desire to avoid risky investments at a time of market volatility and continued uncertainty over the health of Britain’s banks has boosted the attraction of NS&I's inflation beating and 100% guaranteed products.
Basically they want people to spend. Get the velocity of money increasing.. crank up the money supply and wind up the leverage again.
Not sure about the conspiracy theories. NS&I has, and announces in advance, how much money it aims to raise in any given period. This depends on the amount of borrowing the government needs and decides to raise from this source, and also has to be balanced against the risk of providing "unfair" competition for the banks and building societies. Though NS&I usually judge their products well, providing boring but very safe products, with safety and predictability overcoming the middling interest rates, the combination of rubbish interest rates from the conventional savings institutions (who find it difficult to hide their margins with such low base rates and who need to rebuild their capital ratios), the belated realisation of the UK population that it is worth saving something, fears over alternative investments like equities, 50 and 60% 
tax rates, and the unexpectedly high RPI:base rate ratio means that it is easy for NS&I to have their fairly modest £2bn target overwhelmed.
I agree that too much saving, especially in tax-free products has a double hit for the Treasury, but NS&I's current annual take is too small to have that much of an effect.
Will ISAs be hit? Unlikely; I doubt that the government will want people to dump equities, and lots of crucial middle ground electors hold ISAs.
My concern is what happens to maturing certificates - you can reinvest once on maturity in addition to the current issue limit, but if no certificates are on sale, what then? Perhaps the conspiracy theorists do have a point..! A lot more than the £2bn would start to flow back out and it would have to go either into conventional savings (poor return helping rebuild their ratios and us being taxed at punitive rates on the interest, or into equities or spent... however, NS&I still provides the government with fairly cheap loans, especially if our national credit rating drops, albeit not cheap if RPI remains high and higher rate taxpayers buy the tax-free products. Perhaps they'll offer a range of new taxable, unlinked certificates at, say, 3.25% to mop up the maturing certificate market.
DOI - we have index-linked certificates maturing soon.
tax rates, and the unexpectedly high RPI:base rate ratio means that it is easy for NS&I to have their fairly modest £2bn target overwhelmed.I agree that too much saving, especially in tax-free products has a double hit for the Treasury, but NS&I's current annual take is too small to have that much of an effect.
Will ISAs be hit? Unlikely; I doubt that the government will want people to dump equities, and lots of crucial middle ground electors hold ISAs.
My concern is what happens to maturing certificates - you can reinvest once on maturity in addition to the current issue limit, but if no certificates are on sale, what then? Perhaps the conspiracy theorists do have a point..! A lot more than the £2bn would start to flow back out and it would have to go either into conventional savings (poor return helping rebuild their ratios and us being taxed at punitive rates on the interest, or into equities or spent... however, NS&I still provides the government with fairly cheap loans, especially if our national credit rating drops, albeit not cheap if RPI remains high and higher rate taxpayers buy the tax-free products. Perhaps they'll offer a range of new taxable, unlinked certificates at, say, 3.25% to mop up the maturing certificate market.
DOI - we have index-linked certificates maturing soon.
Edited by nomisesor on Tuesday 20th July 21:10
ringram said:
tali1 said:
macca said:
They've been pulled....
NS&I, the government backed savings institution, has withdrawn its savings certificates from sale and reduced the rates on other products in a blow to savers struggling to make a return above inflation.
Higher than anticipated inflation, continued low interest rates and the desire to avoid risky investments at a time of market volatility and continued uncertainty over the health of Britain’s banks has boosted the attraction of NS&I's inflation beating and 100% guaranteed products.
Jeez -that was close! as i managed to put another deposit in to make my full allowanceNS&I, the government backed savings institution, has withdrawn its savings certificates from sale and reduced the rates on other products in a blow to savers struggling to make a return above inflation.
Higher than anticipated inflation, continued low interest rates and the desire to avoid risky investments at a time of market volatility and continued uncertainty over the health of Britain’s banks has boosted the attraction of NS&I's inflation beating and 100% guaranteed products.
Basically they want people to spend. Get the velocity of money increasing.. crank up the money supply and wind up the leverage again.
Ozzie Osmond said:
nomisesor said:
Will ISAs be hit? Unlikely
We'll see. Especially since they seem to be setting up a new "Department For Getting Rid Of Tax Reliefs".Despite a 2yr pay freeze (if RPI stays at 5% = 10% pay cut), plus the pension changes, I was fairly sanguine so long as NS&I and ISAs carried on as before... but it looks as if the chill wind is going to blow through nomisville soon...
nomisesor said:
it looks as if the chill wind is going to blow through nomisville soon...
I fear we are already beginning to feel the breeze. It's not comfortable, but I'm darned sure we can't spend our way out of a problem we spent our way into!With evry day's news the crass stupidity of the Blair years comes more clearly into focus.
Update: 3 year 15th issue Index-linked certificates maturing now can be reinvested either into another 3yr term in the (recently pulled to new investors) 20th issue I/L (by doing nothing) or for 5yr in the 47th I/L issue, both at RPI+1%. The whole sum (a little over £17k if you had invested the limit in 2007) can be re-invested, once only. Alternatively it can be reinvested into the 2 yr 47th or or 5yr 96th issue fixed interest certificates.
I suppose that whilst the government feels it can't distort the market by pulling in more money this way, it doesn't want billions to flow out either, so is allowing people to remain invested.
I suppose that whilst the government feels it can't distort the market by pulling in more money this way, it doesn't want billions to flow out either, so is allowing people to remain invested.
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