Post Office launches new 3 and 5 year inflation-linked bonds
Tuesday, 04 October 2011 12:18
The Post Office has launched a new issue of its popular inflation-nelinked bond.
The new issue offers savers the opportunity to match the retail price index (RPI) measure of inflation and beat it by one per cent gross.
The bond is available over three or five year terms and is on sale now. It is expected to be available until Friday 20th January depending on the demand for it.
The Post Office pulled the last issue of an inflation-linked bond two days early in September due to huge demand. It says that this bond could be withdrawn before the deadline if it is oversubscribed before January 20th 2012.
To ensure competition in the market the Post Office inflation-linked bonds only have a limited amount of funds available. This is to ensure that other savings providers are not penalised by unfair competition.
The new issue offers a choice of two fixed terms. With the three year inflation-linked bond, the saver would receive RPI plus 0.25 per cent gross/0.24 per cent AER, each year and paid at maturity.
The five year inflation-linked bond pays RPI plus one per cent gross/0.98 per cent AER, each year and paid at maturity.
The bond can be opened with a single deposit of between £500 and £1 million. No additional deposits are allowed and withdrawals are not permitted. The return on the investment is calculated annually and paid on maturity.
The rate of return is based on the RPI at January each year. RPI includes the cost of mortgage interest payments and historically is higher than the consumer prices index (CPI).
RPI currently stands at 5.2 per cent. RPI stood at 4.8 per cent in January 2011. The rate of return for the first year will be linked to the level of RPI in January 2012.
Post Office Director of Savings and Investments, Richard Norman, said: "Since we launched the first Inflation Linked Bond earlier this year, inflation has remained high, leaving savers worried about the value of their hard earned cash.
“Our bonds have proved hugely popular in the past, so we urge interested savers to get applications in as quickly as possible. Funds are strictly limited and we may need to withdraw the bond before the official closing date if it is oversubscribed.”
Use the Myfinances.co.uk comparison tables to find the best deal on savings bonds.
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