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Media centre /
Press releaseINFLATION-BEATING INVESTMENT STANDS TEST OF TIME02 June 2005
Index-linked Savings Certificates, the unique, tax-free, inflation-beating investment from National Savings and Investments (NS&I), are 30 years old today. Introduced as an experiment in the summer of 1975 to protect savings against inflation, Index-linked Savings Certificates have stood the test of time, continuing to be the only savings product on the market that offers a safe, tax-free, no-risk home that guarantees inflation-beating savings. Wising up to inflation Index-linked Savings Certificates continue to grow in popularity as an increasing number of people wise up to inflation. Recent research by NS&I reveals that more than one in four (27%) people take inflation into account when saving money, compared to one in five (19%) in August 2003. Currently over 600,000 people have invested more than £8.7 billion in Index-linked Savings Certificates. The maximum investment was originally £500 in 1975 and this has been increased since then, with the current maximum investment of £15,000 introduced in April 2004. Taking into account the change in RPI (Retail Price Index), £15,000 invested in Index-linked Savings Certificates (5-year term) in April 2004 would today be worth £15,766*. Index-linked Savings Certificates Index-linked Savings Certificates 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 and they can be bought for children of any age. They are available to buy online at www.nsandi.com, by telephone on 0500 500 000, by post and over the counter at Post Office® branches. New issues become available when NS&I changes the interest rates available on these investments.
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. Performance of Index-linked Savings Certificates Index-linked Savings Certificates have continued to outperform other savings products over the past 30 years. An investment of £500 in Index-linked Savings Certificates in 1975 would today be worth £4,781, over a nine-fold rise. By comparison, £500 invested in a typical savings account for the same period would now only be worth £2,565, a five-fold rise. And the equivalent of £500 in 1975 would be worth £2,872 in today’s money.
Savings index data supplied by Standard & Poor's. See notes to editors for more information. Jane Dawson of Moneyfacts comments: “Millions of people invest in the broad range of products on offer from NS&I and Index-linked Savings Certificates have certainly stood the test of time. Customers have the benefit of tax-free returns guaranteed to outgrow inflation and with this government-backed investment they can also be confident that their savings are 100% secure." Then and now In 1975 the average house price was £7,500 compared to £147,127¹ today while inflation reached a high of 26% in the summer of 1975.
Cost of living Over the past 30 years, the change in the cost of typical items in a shopping basket has gone up by 530%, demonstrating the need to protect savings against inflation. Thirty years ago, one pound could buy breakfast for an entire family – a pint of milk, a dozen eggs, a loaf of bread, margarine – and there’d still be 17p of change left over. Today, 30 years on, the same breakfast would set you back on average £3.68.
Changes over 30 years As well as changes to the cost of living, our taste in food, film and fads has changed over the years too. Chelsea Football Club has replaced Derby County as the top football team; we’ve substituted spam sandwiches for rocket salad and Sudoku have superseded Top Trumps as the latest craze.
Changes to the RPI ‘basket’ In 1975, goods such as coal, telegram charges and sardines were used to measure the impact of inflation on a typical family budget (RPI). Over the years, the basket of goods and services has been modified to reflect changes in society. Items such ATM charges, mobile phones and chicken nuggets replaced tinned corned beef, disposable razors and dumb-bells in the 2005 index.
END Notes to editors * This figures assumes Index-linked Savings Certificates are held for the full term of the investment 1. Source: Office of the Deputy Prime Minister For further information, digital images, or to arrange an interview call 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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