The Post Office has launched a new issue of its Inflation Linked Bond, available for a three or five year term.
This third issue of the Inflation Linked Bond will be available until 20 January 2012, although if oversubscribed it will be withdrawn earlier.
The three year bond offers annual RPI inflation rate plus 0.25% gross/0.24% AER* fixed each year, paid at maturity.
The five year bond offers annual RPI inflation rate plus 1% gross/0.98% AER* fixed each year, paid at maturity.
Post Office Director of Savings and Investments, Richard Norman, said: “Since we launched the first Inflation Linked Bond earlier this year, inflation has remained high, leaving savers worried about the value of their hard earned cash.
“This new issue of the Inflation Linked Bond offers them another chance to get peace of mind that their savings will be protected against the eroding effects of inflation.”
The savings account bond can be opened with a minimum deposit of £500, the maximum in £1 million. The interest is calculated annually and paid at maturity with no access to the account until the end of the term. That said, early closure of the account is permitted in exceptional circumstances, subject to a charge which means customers could get back less than their original investment.
The rate of return is based on the annual Retail Price Index as measured in January each year, plus a guaranteed fixed return of 1% or 0.25% gross per year. If RPI is negative in any year, the annual return for that year will be the fixed rate – 1% gross for the five year term or 0.25% gross for the three year term.
MoneyHighStreet comments: “Previous Issues of this Inflation Linked bond have proved popular and no doubt so too will this third issue with those savers able to lock their money away in a savings account for a period of time.
“On the face of it an inflation linked savings account does seem attractive but savers do need to consider their options carefully. Whilst inflation is currently rising, how long will it continue?
“Whatever you opt for, ensure you keep an eye on the interest being paid – it’s all too easy to almost forget your savings accounts thinking they are continuing to earn a good rate of return when in fact initial bonus payments may have been paid and your account may be languishing on a poor interest rate.”