Post Office launches three and five year inflation linked bonds

The Post Office has announced the launch of the second issue of its Inflation Linked Bond, available to customers for a limited time period from 15 June to 2 September 2011.

The new issue offers a three and five year term, with a return of

RPI + 1.5% gross/1.46% AER for the five year term, and
RPI + 0.5% gross/0.49%AER for the three year term.

The rate of return is based on the annual Retail Prices Index as measured in August each year, plus a guaranteed fixed return of 1.5% or 0.5% gross per year - ensuring customers' savings are beating the rate of inflation.

RPI includes the cost of mortgage interest payments and has historically run at a higher level than the CPI rate.  For example, the annual RPI in April 2011 was 5.2%, meaning that the annual return would have been 6.7% (5.2% + 1.5%) for the five year term, or 5.7% (5.2% + 0.5%) for the three year term.

Post Office Director of Savings and Investments Richard Norman said: "Rising inflation means that for many people saving is becoming less attractive.  We're helping our customers protect their savings from the impact of inflation with our Inflation Linked Bonds.  The introduction of the new three year term will be particularly attractive to those who are not able to put their money aside for as long as five years."

The bond is available to customers for a limited period only - from 15 June 2011 to 2 September 2011 - and may be withdrawn earlier if over-subscribed.
 
The bond can be opened with a single deposit of £500 (minimum investment £500 and maximum £1 million) with the return calculated annually and paid at maturity.  No additional deposits are permitted.  The account cannot be accessed until the end of the fixed term.