Budget & Saving

New savings deal tied to inflation

A new savings product has been released onto the market which is linked to a rate of inflation.

The five-year bond with BM Savings, which is part of the taxpayer-backed Lloyds Banking Group, has an interest rate which is the same as the Retail Prices Index for the month a year after the account was opened, plus 0.25%.

For example, RPI hit 4.8% in December, so therefore if someone had opened an account in December 2009, they would have an interest rate of 5.05%.

People can save between £500 and £1 million in the bond, rising to £2 million for joint account customers, but they cannot access their money during the five-year period.

Customers can invest in the product between now and March 10, and the bond will have a start date of March 28. People will earn interest of 0.5% for the period between when they open it and the start date.

The product fills a significant gap in the market, as before its launch there were no savings accounts that helped people to beat inflation, after National Savings and Investments withdrew its highly popular products.

Sam Jackson

Money Dashboard