BM Savings launches new Inflation Rate Bond

Commenting on the launch of the Inflation Rate Bond from BM Savings, Kevin Mountford, head of banking at moneysupermarket.com, said: "At a time when we are seeing inflation spiralling, it is good to see BM Savings responding to consumer concern by launching a savings bond which tracks the Retail Price Index (RPI) plus 0.25 per cent. With inflation predicted to rise further in 2011, it is almost impossible to find a savings rate good enough to offset the effects of inflation, so anything that helps beleaguered savers must be welcomed.

"However, savers need to be aware that although the return on this account may be good while inflation remains high, when it starts to fall, the return may not be as good as some of the fixed savings accounts currently on the market. Locking your money away for five years could be a risk as inflation is likely to fall during this period, while Base Rate will rise at some point. There are a number of fixed rate bonds available which currently pay up to 4.5 per cent over five years which may be a suitable alternative for anyone looking to tie up their savings."