Unique tax free return on savings guaranteed to beat inflation

Leeds Building Society’s Inflation Buster Bonds have proved so popular with customers looking for a real return the Society has launched another tax-free version. The Inflation Buster ISA is guaranteed to beat inflation by 2.50%.

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 December is 210.90 and the following December is 219.44, then the percentage change in RPI and the inflation rate over the period is 4.05%. In this scenario, inflation is 4.05% and Leeds Building Society’s Inflation Buster Bond would pay a return of 6.55%.

Karen Wint, General Manager Marketing and Customer Services said, "Savers have seen their real return eroded with decreasing interest rates and RPI running at an average of 4.26% in 2007. As a result demand for our previous Inflation Buster Bonds has been very positive and we are now launching another tax free version, which is extremely attractive in the ISA market.

"The only other RPI linked account offered by National Savings & Investments offers a return of RPI plus 1.35% and limits the maximum investment to £15,000 per issue. Investors wishing to invest in the Inflation Buster ISA have the option to transfer their previous years ISA subscriptions and some customers, who have paid in the maximum £3,000 allowance each year, may have built up a capital balance of £27,000 plus interest.

"Furthermore, customers have access to all their funds at any time and the account can be opened at any of our 68 branches or by post. I believe this is an excellent addition to any investor’s portfolio."

A maximum investment of £27,000 made on 7 February 2008 will have a tax free maturity value of £30,758 after two years, assuming that the rate of inflation is 4.05% over the term. This is made up of £93 for early investment and £3,665 from the RPI inflation rate.

For more information, visit leedsbuildingsociety.co.uk.