Savers boosted by Post Office plans

The Post Office has launched a new product to help savers avoid seeing the value of their money eroded by inflation.

A new market-leading five-year bond is being offered by the group paying returns linked to inflation as measured by the Retail Prices Index.

People will receive an annual return based on RPI in April every year, plus interest of 1.5%. Savers will still benefit from 1.5% interest if RPI is negative.

If RPI was 2.5% then customers would have a total annual return of 4%.

Customers can select the Inflation Linked Bond for a limited time between February 22 and April 27, but the Post Office could end it sooner if it is over-subscribed.

People can invest between £500 and £1 million in the bond, but they will not be able to access their money again until it ends in May 2016.

The product comes just a day after Yorkshire Building Society launched two five-year inflation-linked bonds, while BM Savings, part of the taxpayer-backed Lloyds Banking Group, started offering a similar product last month.

Savers currently face an uphill battle to stop the value of their deposits being eroded by inflation.

RPI rose to 5.1% in January, the latest month for which figures are available, while the Consumer Prices Index reached 4%.

As a result, there are only a handful of accounts available which enable savers to stop the value of their savings being eroded once tax and inflation are taken into account.

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