moneysupermarket.com - Inflation Linked Bond launches

Commenting on the recent launches of Inflation Linked Bonds from BM Savings and more recently The Post Office and Yorkshire Building Society, Kevin Mountford, head of banking at moneysupermarket.com, said: "There has been concern for some time that no savings accounts deliver a rate of return above inflation. The recent trend among providers is to capitalise on savers' worries over high inflation and this will no doubt lead to many consumers flocking to these products. These will be attractive to those people who are finding it almost impossible to get an account that shields their savings against the eroding effects of inflation, so it's good to see providers tackling consumer concerns.

"However, as with most products, the devil is in the detail and although inflation is currently high, the benefits will only be in the short term. The likelihood is that inflation will start to fall towards the end of this year, while Base Rate will increase at some point. Anyone considering inflation linked savings products need to balance the risk of variable rates against the certainty of fixed rate products. If you are a UK taxpayer, then you will also pay income tax on any interest earned, although the Yorkshire Building Society Bond does have an ISA option. There are currently some attractive rates available on fixed rate ISAs and bonds, up to 4.75 per cent, so over a five year term the return may be higher, especially once the Bank of England brings inflation back under control. A lot can happen in five years, so consumers need to be aware that the savings landscape may change considerably over this period."