Post Office launches new issue of inflation linked bond

The Post Office has launched the fourth issue of the popular Inflation Linked Bond, open to applications from Thursday 19 January until Thursday 29 March 2012.

Forms must be posted in time to be received by the Post Office by Thursday 29 March at the latest.  The bond may be withdrawn earlier if it is oversubscribed before this date.

The new issue offers a choice of two fixed terms:

Three year term - offers annual RPI inflation rate plus 0.25% gross 0.24% AER fixed each year, paid at maturity

Five year term - offers annual RPI inflation rate plus 0.50% gross 0.49% AER fixed each year, paid at maturity.

The rate of return is based on the annual Retail Price Index as measured in March each year, plus a guaranteed fixed return of 0.50% or 0.25% gross per year - ensuring customers' savings are always beating the rate of inflation.  RPI includes the cost of mortgage interest payments and has historically run at a higher level than the Consumer Price Index (CPI) rate.

For example, the annual RPI rate in December 2011 was 4.8%. If this Inflation Linked Bond had been available in the year before (and used December RPI readings as the basis for the return) the annual return for the first year would be 5.3% (4.8% + 0.50%) for the five year term, or 5.05% (4.8% + 0.25%) for the three year term.

Post Office Director of Savings and Investments, Richard Norman, said: "Since the launch of the first Inflation Linked Bond in 2010, inflation has fluctuated but has continued to remain high, leaving savers worried about the effect it will have on their savings.

"In an uncertain climate, it's important to offer consumers the chance to have peace of mind with their savings.  The fourth issue of our popular Inflation Linked Bond means that people have the opportunity to save, safe in the knowledge their money is protected against the ravaging effects of inflation.

"Each issue of our Inflation Linked Bond has proved extremely popular, so we urge savers to ensure applications are made as soon as possible. We will aim to honour all applications, but funds are limited, and we may need to withdraw the bond before the official closing date"

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.

To find out more about the Post Office Inflation Linked Bond or any other savings product, visit postoffice.co.uk/savings.