Leeds launches new Bond guaranteed to beat inflation

Leeds Building Society is set to launch a new Inflation Buster Bond (available from Wednesday October 10th) which has proved extremely popular with customers looking for a real return from their savings.

The Bond is guaranteed to beat inflation by 3.00% and any early investment, prior to strike date on 1 December 2007, will receive interest equivalent to the Bank of England Base Rate credited on 30 November.

The return is linked to the Retail Price Index (RPI), which is the official measure of how much goods and services bought by an average UK household changes. Items measured by the RPI include food, clothing, education and child care, council tax, heating and lighting and mortgage interest payments.

The inflation rate is the percentage difference between RPI on two dates. So, if the RPI in August is 207.30 and the following August is 215.74, then the percentage change in RPI and the inflation rate over the period is 4.07%. In this scenario, inflation is 4.07% and Leeds Building Society’s Inflation Buster Bond would pay a return of 7.07%.

For example, if the rate of inflation is 4.07% a year over the term, an investment of £10,000 made on 29 August 2007 will have a pre-tax maturity value of £11,554 after two years. This is made up of £79 for early investment and £1,475 from the RPI inflation rate.

Paul Riley, Head of Group Treasury said, "The demand from customers for this bond has been overwhelming and, as a result, we are now launching a third issue. The annual change in RPI was 4.1% in August, which is an increase on the previous month. This product provides excellent peace of mind with the inflation link, so no matter what happens, customers will receive a guaranteed real return.

"The bond is ideal for investors looking for a competitive return and is available on a minimum operating balance of only £1,000. If the Inflation Buster Bond had been available in earlier years, it would have out-performed the average UK savings rate by 1.57% in 2005 and 2.08% in 2006.

"Customers also have the flexibility to operate this bond at any of our 70 branches or by post. I believe this as an excellent addition to any investor’s portfolio."

For more information, visit leedsbuildingsociety.co.uk.