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Media centre /
Press releaseBRITISH SAVERS IGNORE INFLATION AND TAX AT THEIR PERIL01 September 2003National Savings and Investments' three and five year Index-linked Savings Certificates are the only products to offer a tax-free return guaranteed to be above inflation. According to research from National Savings and Investments (NS&I), three in every four savers (74%) do not take inflation into account when looking to save money and three in five (59%) do not take their tax status into account either. NS&I is concerned that the majority of savers ignore the effect of tax and inflation on the rates of return they receive. Research findings showed that: -
Those who ignore inflation (currently 3.1%, as measured by the Retail Price Index) and their tax status when they look to save are ignoring the effect these have on the spending power of their savings. Those who invest in a savings product which, after tax, pays less than the rate of inflation will see the spending power of their savings reduce compared to when they originally invested their money. In effect, they will have gained interest but 'lost' money. Gill Cattanach, NS&I's Commercial Director, said: "We are concerned that people could be missing out on the chance to maximise the rate of return on their savings because they are not taking inflation and tax into account. "Most people know that £1,000 buys much less today than in would have 10 years ago. Yet when it comes to saving for the future, the majority of people seem to be disregarding the impact that future inflation will have on their investments. "It is all very well to choose a product with an attractive headline rate, but once tax and inflation have been accounted for, the actual return can be much less appealing. People should consider the effects of future inflation, so they can choose a savings product with an interest rate that is likely to be above inflation - otherwise they could actually see their spending power fall. "But predicting the future rate of inflation is not easy. With NS&I's Index-linked Savings Certificates you can be sure the return will beat inflation, tax-free." NS&I Index-linked Savings Certificates NS&I is currently the only provider to offer a way of saving with a rate of return that is guaranteed to be above inflation AND tax-free. NS&I offers three-year and five-year Index-linked Savings Certificates which give savers, who want to lock up their money up for this time, the opportunity to invest between £100 and £10,000 in each Issue. As an example, if the RPI increased at 3.1% p.a. (the current rate), for the next five years, then the five-year Index-linked Savings Certificate paying index-linking plus 0.9% p.a. would give an overall return of 4.0% p.a. - equivalent to 6.67% p.a. gross for a higher rate taxpayer and 5.0% p.a. gross for a basic rate taxpayer, at current tax rates. The value of £1,000 invested after five years would be £1,216. Based on a similar example, the three year Index-linked Savings Certificate with a rate of index-linking plus 0.7% would give an overall return of 3.8% p.a. - equivalent to 6.33% p.a. gross for a higher rate taxpayer and 4.75% p.a. gross for a basic rate taxpayer, at current tax rates. The value of £1,000 invested after three years would be £1,118. The Index-linked Savings Certificates currently on sale are:- Three Year Index-linked Savings Certificates (2nd Issue)
Five Year Index-linked Savings Certificates (29th Issue)
*Annual Equivalent Rates They can be bought :- Over the telephone
Via the NS&I web-site
At any one of the UK's Post Office counters By Post
ENDS Notes to Editors:1. The National Savings and Investments survey was conducted by Taylor Nelson Sofres via CATI between 8th - 10th August 2003. The sample size was 1,011 GB adults aged 16+. 2. National Savings and Investments is one of the largest savings organisations in the UK, offering a range of savings and investments products (to 30 million customers). All products offer 100% security because they are backed by HM Treasury. 3. Further information on NS&I, including press releases and product information, is available on the website at www.nsandi.com. For further information and photographs, contact the NS&I media team:
Media team The numbers below are for media use only. Customers wishing to contact NS&I can find details here.
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