Spotlight On: Post office inflation-linked bonds

The deal

The Post Office has relaunched its popular inflation-linked bond. You have until 20 january 2012 to sign up.

The good points

It pays 0.25 per cent above the rate of the retail prices index over three years, or RPI plus 1 per cent over five years, thereby guaranteeing that your savings beat inflation.

The bad points

These bonds but they've become markedly less attractive since the last issue was withdrawn in September. Then savers were offered 0.5 per cent above RPI over three years or 1.5 per cent above RPI over five. Don't presume that the current 5.2 per cent RPI rate cent will be used. January's RPI will be used, which may, in theory, be lower.

Conclusion

If you want to guarantee that savings don't diminish in real terms then you have to find a way to beat inflation. This is one solution. But you have to lock cash away for either three or five years. You could be better off waiting until National Savings launches its next tax-free inflation-linked savings bonds, probably next April.