Homeowners looking to find an inflation proof home for their savings now have the chance to find such a place, courtesy of the Government financed National Savings and Investments (NS&I) department.
Tax exemption will allow savers to redress the balance
Savers who have seen their nest eggs slowly nibbled away by rising prices in the shops, at the forecourts, and even in their homes via increased charges for products such as energy and home insurance can now invest £15,000 into a five year savings bond that will guarantee them interest based on the Retail Prices Index (currently hovering at 5.3%) plus an average of 0.5% over the full term and the best thing of all is that the interest is tax exempt.
New bond the first for almost a year
The new bond issue from the NS&I comes after a 10 month period in which it stopped offering inflation proof bonds to new customers due to what it described as excessive demand. The March budget did make way for the NS&I to increase its bond selling by £2 billion and that is exactly what it is now doing. The bonds can be cashed in before the term if inflation falls, although everyone must hold on to them for at least a year. With interest levels ranging from RPI+ 0.25% after year 1 to RPI+ 0.86% after year 5 the Government department best known for its sale of Premium Bonds is expecting to be inundated with customers in the coming weeks.
Sweet revenge for those who were let down
Savers, particularly those who feel they have been let down by banks and building societies in respect of loan repayment rates when they looked to take out affordable home insurance on affordable homes, will no doubt take great pleasure in transferring their money from the High Street mortgage providers and into the Government coffers. The banks and building societies are not all happy about a Government Department muscling in on their domain and are now complaining about unfair competition. One gets the feeling the complaints may well fall on deaf ears.
The new bonds will be especially attractive to top rate or even middle rate tax payers due to the tax exemption and prospective buyers will have to be quick off the mark.