Budget 2011: NS&I inflation-linked savings certificates to be reintroduced
The group announced: "The positive net financing target will allow NS&I to plan the re-introduction of savings certificates."
They closed last summer for the first time since their launch 35 years ago. Since then, RPI inflation has grown to 5.5%.
Although they will definitely return to the market this year, NS&I cannot confirm when exactly they will be reintroduced.
Patrick Connolly, chartered financial planner from AWD Chase de Vere, comments that their relaunch is 'fantastic news for savers'.
'Many savers currently face the dilemma of losing money in real terms on their cash savings or putting their capital at risk as they try and generate better returns. These products will provide the only way that savers could be sure of getting returns greater than inflation while still protecting their capital.
When they are reintroduced, Connolly thinks 'there will be even more demand': 'This means that either savers would need to be restricted to a small allocation or the products would sell out very quickly again. When index-linked certificates are relaunched our advice to many savers will be to get in quickly, because they may not be around for long,' he adds.
Ros Altmann, director general of Saga, recently put pressure on the government to relaunch these savings certificates, slamming the decision to remove them as "one of the biggest disasters" in the past couple of years.
She today labelled their reintroduction as "great news".
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).