Santander launhces new Inflation Savings Bond

Santander is launching a new issue of its Inflation-linked Savings Bond on Wednesday 7 December, for a limited time only, offering a return equivalent to 105 per cent of the growth in the RPI over the five and-a-half year term of the bond, providing peace of mind to customers that the real value of their savings will not become eroded by inflation.

Santander is also giving customers protection in case inflation does not rise over the term, as the minimum return that they will receive is 18% (equivalent to 3.06% AER). It is available from 7 December to 5 January or earlier if sold out, to savers wanting to deposit a minimum of £500 for a five and-a-half year fixed term.

Santander Inflation Linked Savings Bond (Issue 8) - example of returns

If the initial index level was 238.0 and the final level at maturity was 285.6, the growth of the RPI would be 20%. A customer would receive back their initial deposit plus 21%. This would be a return of £12,100 on an initial deposit of £10,000.

If the initial level was 238.0 and the final level was 249.9, the growth of the RPI would be 5%. A customer would receive back their initial deposit plus the minimum return of 18%. This is a return of £11,800 on an initial deposit of £10,000.

Alexia Kilby, Head of Investments at Santander, said: "Many savers are worried that the returns they are earning on their money will not keep up with inflation. With the Retail Prices Index (RPI) currently at 238.0, an increase of 5.4% compared to the previous year, savers would need to have earned at least 5.4% to ensure the real value of their money was not reduced. This is why Santander has developed the Inflation Linked Savings Bond.

"The Inflation Linked Savings Bond will ensure savers earn a return above the rate of inflation. It will pay a return of 105% of the growth in the Retail Prices Index (RPI), so that whatever inflation increases by over the term, the real value of your money will grow at a higher rate. What's more, the minimum interest you will earn is 18% (equivalent to 3.06% AER). This means that even if inflation does not grow over the term, you will still earn an 18% return on your savings."