UK banking group Leeds Building Society is introducing a new and innovative inflation buster bond, which guarantees to deliver a return of 3% greater than inflation, based on the retail price index.
So far for this year, the average retail price index (RPI), which defines the average measure of change in the prices of goods and services purchased by households in the UK, is 4.5%. This has been largely due to the increased cost of heating and lighting, education and child care, and mortgage interest payments.
Karen Wint, head of marketing & PR, said: This product provides excellent peace of mind with this inflation link, so no matter what happens, customers will receive a guaranteed real return. If RPI continues at this level over the product term, customers will receive 7.5%, which is superior to the current best two-year fixed-rate deals available on the market at around 6.5%.
The bond is directly linked to the RPI for a fixed period of two years with effect from August 1, 2007. Any early investment prior to this date will receive interest equivalent to the Bank of England base rate, credited on July 31, 2007.
Ms Wint continued: The bond is ideal for investors looking for a competitive return and is available on a minimum operating balance of only GBP1,000. Although the inflation buster bond was not available before today, it would have out-performed the average UK savings rate by 1.57% in 2005 and 2.08% in 2006.