NS&I index-linked bonds back on sale
Index-linked bonds from National Savings & Investments are now back on sale but savers should hurry to snap these up before they're taken off the market.
The new issue bonds are fixed at five years and you can choose from either an index-linked account, linked to RPI plus 0.5%, or a fixed-interest savings certificate set at 2.25%.
The popular bonds were taken off the market last July after high demand from savers struggling to find high interest accounts.
With RPI currently at 5.2%, finding an account that can beat this rate is tough. In April there were only 25 accounts available beating inflation for a basic rate taxpayer and the highest on offer currently comes from BM Savings paying 5.05% for a five-year fixed-rate account.
The certificates must be bought through NS&I, either on its website (www.nsandi.com) via one of its call centres or by post, and you can invest anything from £100 to £15,000.
The return of NS&I bonds was first flagged up in the Budget back in March and NS&I predicts inflows of around £14 billion.
Jane Platt, chief executive at NS&I, says it aims to keep the savings certificates on sale for a sustained period of time and to enable as many people as possible to invest in them, but after the popularity of the past bonds, and with the current poor interest rates from other accounts, it's likely these will not be around for long.
Invest sooner rather than later
Patrick Connolly, spokesperson at AWD Chase de Vere, says the reintroduction of these accounts is great news as so many savers currently face the dilemma of losing money in real terms on their cash savings, or putting their capital at risk to try and generate better returns.
He also warns that although NS&I say the accounts will be around for a "sustained period" it's better to "invest sooner rather than later as demand may exceed supply and there is a risk the products may not be around for too long".
Replaced as the official measure of inflation by the consumer prices index (CPI) in December 2003. Both the Retail Price Index and CPI are attempts to estimate inflation in the UK, but they come up with different values because there are slight differences in what goods and services they cover, and how they are calculated. Unlike the CPI, the RPI includes a measure of housing costs, such as mortgage interest payments, council tax, house depreciation and buildings insurance, so changes in the interest rates affect the RPI. If interest rates are cut, it will reduce mortgage interest payments, so the RPI will fall but not the CPI. The RPI is sometimes referred to as the “headline” rate of inflation and the CPI as the “underlying” rate.
An increase in the general level of prices that persists over a period of time. The inflation rate is a measure of the average change over a period, usually 12 months. If inflation is up 4%, this means the price of products and services is 4% higher than a year earlier, requiring we spend and extra 4% to buy the same things we bought 12 months ago and that any savings and investments must generate 4% (after any taxes) to keep pace with inflation. Since 2003, the Bank of England has used the consumer prices index (CPI) as its official measure of inflation (see also retail prices index).