NatWest International launches UK Inflation Deposit account

NatWest International Personal Banking (IPB) has launched UK Inflation Deposit, a four year deposit account designed to give you the opportunity to earn a potential return linked to the annual rate of UK inflation.

UK Inflation Deposit account

The UK Inflation Deposit is designed to give clients the opportunity to earn a potential return linked to the annual rate of UK inflation, as represented by the UK Retail Price Index. An annual return equivalent to the UK RPI rate, plus 0.25%, is calculated in each year. Any annual returns are added together and paid on the maturity date.

The inflation measure used by the account is the UK RPI Rate. If the level of the Index is higher than where it was a year earlier, the UK RPI rate will be positive meaning prices have risen and inflation exists. Conversely, if the Index is lower than where it was a year earlier, the UK RPI Rate will be negative and negative inflation exists.

To determine the UK RPI rate on each anniversary date, the level of the Index from two months previously is observed and compared with the level recorded 14 months previously. For example, on the first anniversary date on 23 January 2013, the November 2012 level of the Index will be observed and compared with the November 2011 level and the UK RPI rate will be calculated as the percentage change in the Index between these two dates.

Dave Isley, Head of NatWest IPB comments "Inflation is a fact of our lives. What we can try to do however is to make it work for you rather than against you. We have responded to demand in the market for an inflation linked product by introducing the UK Inflation Deposit account.

With this product, if the annual inflation rate is higher than the annual interest rate you are earning on your savings, then the interest rate on your savings for that period is negative in "real terms". Therefore over time you may not be able to buy as much in the future as you can today. By linking your potential interest rate to a measure of inflation, your deposit may be protected against much of this fall in the value of your savings caused by rising inflation."