Post Office's RPI-linked bonds offer savings lifeline
Sunday 09 October 2011
Hard-pressed savers scrambling to beat inflation were offered a lifeline last week when the Post Office reintroduced its retail price increase (RPI) linked bond.
The bonds, which were withdrawn a few weeks earlier, had been reissued but offered a less generous but still inflation beating rate of return. The three-year fixed term now pays RPI plus 0.24 per cent (compared with 0.49 per cent previously) and a five-year term is plus 0.98 per cent (compared with 1.46 per cent).
"They launched this quicker than I expected, probably because the rates aren't quite as good as a few weeks ago, so there will be demand from other customers," said Ed Bowsher from financial advice site Love Money.
But with RPI standing at 5.2 per cent, the rates of return on the account are not to be sniffed at, particularly as best buy savings accounts barely top 3 per cent. "It's not a bad deal. It's guaranteed to beat inflation, although an RPI plus 0.24 per cent isn't a fantastic reward for locking your money away for three years," Mr Bowsher added.
Tony Waltham from Blue Sky independent financial adviser said: "A fixed-term growth bond is not suitable for people who want to invest their capital for income. It'll be enormously popular but it may not be entirely suitable for everyone."
Another disadvantage with an index-linked bond is that you cannot withdraw money as and when you need it, often incurring high penalties if you want access to your cash before it matures.
This differs from some fixed-rate accounts, where you're able to withdraw a certain amount each year. Index-linked bonds are suitable really only for people who are certain that they don't need to touch their money.
"Consumers have to prepare for their money to be tied up, and even if inflation did go down it shouldn't matter as they're not trying to maximise their return," said Mr Waltham.
Despite these limitations, the offer is likely to be snatched up quickly. It's advertised as being available till January 2012, but if it's oversubscribed then it will be withdrawn earlier.
Mr Bowsher advised: "Consumers should assume that it will only last a fortnight. The products will be popular; people are worried about inflation and want protection – even if the return is taxable."
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
Actress sees off speculation about her appearance in an amazing way
Review: Despite an uphill climb to see Jake Bugg in action, his performance is notably flat
Mark Dampier: Woodford’s young companies could be the stars of the future
The best - and worst - investments in 2013
Money round-up video: Low-rate mortgages; comparison sites; ethical finances
Nationwide forced to apologise again over online banking problems
Bargain Hunter: Cut-price radiator reflectors can stop all that heat going to waste
- 1 Renee Zellweger on plastic surgery reports: 'I'm living a fulfilling life and I'm thrilled that perhaps it shows'
- 2 Salisbury ranked seventh-best city in the world to visit in Lonely Planet’s Best in Travel 2015
- 3 Disney announces new female-led film Moana
- 4 Banksy not arrested: Internet duped by fake report claiming artist's identity revealed
- 5 Russell Brand threatened with arrest after filming outside Fox News headquarters
Cameron is warned 'no possibility' of UK reducing immigration and that bid to bring in quota on migrant workers would be illegal
Residents should throw a street party and mix with immigrant neighbours, councils told
Russell Brand threatened with arrest after filming outside Fox News headquarters
Of course, teenage girls need role models – but not like beauty vlogger Zoella
London bus driver 'kicks gay couple off for kissing'
Jose Manuel Barroso warns David Cameron against making 'historic mistake' over immigration reforms
iJobs Money & Business
£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...
£18000 - £23000 per annum + Commission: SThree: The SThree group is a world le...
£18000 - £23000 per annum + Comission: SThree: The SThree group is a world lea...
£20000 - £25000 per annum + OTE £Competitive: SThree: SThree Group and have be...
Day In a Page
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village