We've had occasion to remark several times that, for the average punter, NS&I's tax-free, RPI+1% bond (implicitly AAA-rated) was a remarkable offering, almost too good to be true (in our humble opinion); and that, personally, we were up to our gills in them.
Too good indeed: the plug was pulled at midnight.
Yesterday I wrote: "the private demand to replace public spending has not been identified: for the past 10 years most private investment has been in real estate": and perhaps I should have noted just how much £££ has latterly swung in behind these inflation-proof instruments.
So is the government conspiring to push private money into reviving the private sector ? And will it work ? Where will the money now go, that would have been invested in RPI+1 ?
The amounts involved are not insignificant: reportedly, £2 bn in 3 recent months, totally £17 bn in all. The bonds mature variously in 2, 3 & 5 years, so a decent chunk will be maturing each year, and many folk automatically roll them over. If (*sticks finger in air*) we say that perhaps £6 bn might be looking to roll over in a year, plus (4 x 2 = 8) at current run-rate: this might be £14 bn per annum, ballpark, currently looking for the benefits NS&I was offering - in 2008 it was £ 12.5 bn.
The building societies' 3%, taxed, not-secured- above-£50k, doesn't look quite the same (again, IMHO). In a later post we'll take a look at how commodities have fared this year.
So where will it all go ? Will this be the boost to private enterprise the government is pinning all our hopes upon ?