New Inflation Linked Savings Accounts From Yorkshire

Yorkshire Building Society has two new savings accounts which are linked to inflation to help with savings returns.

There is the Protected Capital Account which is a 5-year savings account which is linked to the Retail Price Index (RPI).

This account is available either as an annual income or maturity return option, providing investors with a return at the end of the investment term.

The annual income account offers gross annual return as follows:

• Annual Period 1 – RPI % published for March 2012 by the Office for National Statistics plus 0.10%
• Annual Period 2 – RPI % published for March 2013 by the Office for National Statistics plus 0.10%
• Annual Period 3 – RPI % published for March 2014 by the Office for National Statistics plus 0.10%
• Annual Period 4 – RPI % published for March 2015 by the Office for National Statistics plus 0.10%
• Annual Period 5 - RPI % published for March 2016 by the Office for National Statistics plus 0.10%

If the March RPI% for any annual period is zero or negative the customer will simply receive the 0.10% minimum return provided by the Plan for that annual period.

Return will be paid out at the end of each annual period to an account nominated by the customer.

For cleared funds received by Credit Suisse by 10 March 2011 there is an early investment bonus of 0.5%.

With the maturity version of the Protected Capital Account, investors initial capital will be returned in full at the Plan Maturity Date (Early Exit Fees apply, except in the event of the investors death during the term).

For this the gross maturity return is 1.5% (equivalent to 0.29% AER) plus 100% of the increase in the level of the RPI between March 2011 and March 2016. If there is no increase in the RPI customer will simply receive the 1.5% minimum return provided by the Plan at the end of the investment term.

Again there is an early investment bonus for cleared funds received by Credit Suisse by 10 March 2011.

Simon Broadley the Yorkshire’s Retail Investment Manager commented “In the current economic climate with interest rates remaining at an historical low, and with significant press coverage around the high levels of inflation, the Society is keen to provide its members with a product that allows them to maintain the true spending power of their savings.

By choosing this product they can be confident that their savings will track inflation irrespective of what happens over the coming years”.

And he added “”Additionally, if you haven’t already invested in a Cash ISA during the 2010/11 tax year, you can invest your allowance of £5,100 in this PCA.  This means that PCA savings will stay ahead of inflation, as you won’t pay any tax on them.

You can even use your 2011/12 Cash ISA allowance before the next tax year begins, so you get to take advantage early.”

The minimum deposit for these savings accounts is £3,000 and the maximum £85,000 and the product is availale from all brands of the Yorkshire Building Society Group (Yorkshire Building Society, Chelsea Building Society and Barnsley Building Society).

MoneyHighStreet.com comment: On the face of it these inflation linked savings accounts do seem attrative but savers need to consider their options carefully. Whilst inflation is currently rising, how long will this continue?

The returns available from a variable rate savings account, albeit linked to inflation, need to be weighed up against a fixed rate savings account and in doing this ensure the assessment is made considering the life of the account, in this case 5 years.