Spotlight On: Post Office's Inflation-linked bond

Simon Read
Saturday 26 March 2011 01:00 GMT
Comments

Your support helps us to tell the story

From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.

At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.

The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.

Your support makes all the difference.

The deal

The Post Office's five-year inflation-linked Bond pays the rate of RPI plus 1.5 per cent gross as long as you open the account with at least £500 by 27 April.

The good points

The latest official figures announced this week showed that RPI climbed to 5.5 per cent in February — up from January's figure of 5.1 per cent. On that basis the account looks potentially attractive, as it would pay 7 per cent.

The bad points

The interest rate is based on April's RPI figures and then held at that for the next year. If the inflation measure continues to rise then the returns could prove handsome. But if the rate suddenly drops, it would not be such a good deal. You also have to lock your money away for five years.

Conclusion

If your savings account doesn't beat inflation, you're effectively seeing the real value of your cash shrinking. This account could be a winner then. However, savings rates are unlikely to remain at their low level for the next five years which could mean ending up with a comparatively paltry rate if they start to outstrip inflation, which is entirely possible.

Join our commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

Comments

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in