12th May 2011
With inflation running high and eroding the value of any cash savers set aside – the Retail Price Index (RPI) currently stands at 5.3% – these bonds are particularly attractive.
The five-year bonds allow savers to invest up to £15,000 and pay RPI plus 0.5 percentage points – making a return of 5.8% based on current inflation. According to Moneynet, this returns beats anything on the market, and the best alternative is Birmingham Midshires's five-year fixed-rate bond paying 5.05%.
The bonds were withdrawn from sale in July 2010 because of excessive demand. However, the chancellor's decision at the 2011 budget to increase the net financing target by £2bn for NS&I has enabled the reintroduction of these bonds.
Danny Cox, from independent financial adviser (IFA) Hargreaves Lansdown, says: "This is great news for savers. Index-linked certificates are one of the best ways to protect savers cash from inflation and they are tax-free.
"I was surprised but very pleased they remain linked to RPI: I was expecting a change to a CPI link which would have generally resulted in lower rates of return. I expect these certificates to be very popular and may fill their allocation quickly."
A spokesman for NS&I says: "Our aim is to keep Savings Certificates on sale for a sustained period of time and to enable as many savers as possible who wish to invest to do so. With this in mind we will be offering a 5-year term, only available direct from NS&I. We understand fully that we will see very high demand for Index-linked Savings Certificates. For those who want to invest the easiest and quickest way is to visit nsandi.com."
NS&I fixed term certificates have also re-opened, paying 2.25% over 5 years, but these are less attractive than the index-linked version, says Cox.
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