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Media centre /
Press releaseNS&I RPI TRACKER: ISSUE 219 April 2005RETAIL PRICES INDEX MARCH 2005: STATIC National Savings and Investments RPI tracker for March 2005, incorporating Index-linked Savings Certificates cash values
The RPI rate of 3.2% remains unchanged since January. This means it is vital that savers take the impact of inflation into account when choosing a home for their savings. If savings rates and RPI continue to diverge, it means the value of any money in savings accounts which do not protect against inflation is diminished marginally in real terms, reducing the purchasing power of the pound in their pocket. RPI tracker results The RPI tracker chart shows the value of £1,000 invested in a typical savings account five years ago based on Standard & Poor’s UK savings index, compared to the rise in inflation (RPI) over the same period. This index shows that, since the middle of 2001, the average return on a range of savings accounts has remained below RPI. The RPI tracker also shows the equivalent return on a five-year Index-linked Savings Certificate, which provides an inflation-proof, tax-free return in line with RPI and with additional interest on top.
Savings index data supplied by Standard & Poor's. See notes to editors for more information. RPI tracker in detail
RPI and CPI: the differences The Retail Prices Index (RPI), often referred to as the headline rate of inflation, is an average measure of a change in the prices of consumer goods and services in the UK, including things like butter, transport fares, foreign holidays and, importantly, mortgage interest payments. The Consumer Prices Index (CPI), introduced in December 2003, is an inflation target based on the Harmonised Index of Consumer Prices (HICP) and measures the prices of consumer goods and services, but excludes many which relate to housing. While RPI includes mortgage interest payments, which may fluctuate over time, the CPI excludes council tax, mortgages, house depreciation, buildings insurance, estate agents’ and conveyancing fees. As a result, the CPI target is lower than the RPI target. However, NS&I’s Index-linked Savings Certificates will continue to be based on the RPI and, hence, give higher returns. Index-linked Savings Certificates These offer an inflation-proof, tax-free return over three or five years. Anyone aged seven or over can invest between £100 and £15,000 in either or both issues. A new issue becomes available when NS&I changes the interest rate available on this investment.
These figures assume current rates of tax and that the RPI continues at its current level of 3.2% for the term of the investment. The impact of inflation British people remain largely unaware of the effects of inflation on their savings when choosing a home for their money, according to research from NS&I. In the January 2005 survey, almost two-thirds of people (64%) said they did not take inflation into account when looking to save. In the previous survey, in February 2004, 66% of people said they did not take inflation into account when saving. At the same time, there has been very little change in the number of people who said they did take inflation into account. In January this year, the figure was 28%, compared to 27% in February 2004. ENDS Notes to Editors 1. The return on an Index-linked Savings Certificate assumes that the RPI increases by 3.2% for each of the next five years. They also assume current rates of tax and that the certificate is held for the full term. 2. The RPI tracker table shows the net UK savings index (data from Standard & Poor’s), the RPI and a five-year Index-linked Savings Certificate, all rebased to £1,000. The data used to calculate these figures is for two months preceding the date of this media release (i.e. for the March RPI tracker, the data used is current to January). 3. For the Index-linked Savings Certificates cash value chart for April 2005, please contact the NS&I media team. Future issues of the NS&I RPI tracker will include the cash values figures. The next NS&I RPI tracker will be published on 19 April 2005. 4. For more information on the NS&I RPI tracker, contact the NS&I media team, available 24 hours. Jonathan Akerman 020 7348 9433
Media team The numbers below are for media use only. Customers wishing to contact NS&I can find details here.
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