Fight Inflation With BM Savings Bonds and ISAs

Published: 14 July 2011 By Julian Stone Leave a Comment

BM Savings is helping customers beat inflation with a new range of inflation-linked bonds and ISAs – designed to prevent your money being worn away by inflation rises.

Savings AccountsIf you’re one of the many people worried about the effect high inflation is having on the value of your savings, take a look at the latest inflation-linked products from BM Savings.

Their new range of bonds and ISAs pay the Retail Prices Index (RPI) measurement of inflation plus 0.25% for three years, or RPI plus 0.5% for a period of five years.

The benefit of an inflation-linked savings product is that the rate of interest you receive on it increases or declines with the rate of inflation, protecting your money’s real value from being eroded by jumps in the rate of inflation.

While these products don’t pay enough above the RPI rate of inflation to beat both inflation and tax, the rate on the five-year bond is enough to combat the Consumer Prices Index (CPI) rate of inflation as well as the basic tax rate.

The CPI’s measure of inflation fell to 4.2% in June, according to the Office for National Statistics. Similarly, the RPI, which takes mortgage interest into account, fell from 5.2% to 5%. While inflation slowed in June, it is nonetheless expected to rise as the Bank of England leaves the base rate of interest unchanged.

Moneyhighstreet comments: “Inflation-linked savings products sound like a great idea right now, while inflation remains high – and that’s true. But as the UK economy recovers, the Bank of England will raise the base rate of interest and inflation is likely to drop.

“So over the course of three to five years, your return might be lower than you expect.

“Some commentators have suggested that a strong alternative to these products is the National Savings and Investments’ five-year index-linked savings certificates, which offer the same rate, but allows deposits of £15,000, where cash ISAs are limited £5,340.

“Of course you will need to make your savings decisions based on your own specific needs.”

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