New inflation-linked bond to rival NS&I

Written by Melissa Stewart on June 24, 2011 – 1:26 pm

The Post Office have just released an inflation-linked bond that pays 1% more in fixed interest than the popular NS&I Savings Certificates…

They used to be best of friends. In fact, barely a year ago you could even stroll into the branch of one, and pick up an account issued by the other. But, no more – the Post Office and National Savings and Investments (NS&I) are now rivals, battling it out in the arena of inflation-linked bonds.

NS&I returned to the inflation-linked market last month with the 48th issue of their popular Savings Certificate paying 0.5% over the Retail Prices Index measure of inflation (RPI). But in the ten months that NS&I had been absent from the sector, several other linked accounts began to appear. One provider who launched such an account was the Post Office, offering a bond paying 1.5% above RPI.

The first issue of this Post Office account was taken off sale back in April, around a month before NS&I returned to the market. But now a second issue has been released – pitting the Post Office in direct competition with its former partner, NS&I.

The Post Office is offering the second issue of their Inflation Linked Bond on a three-year and five-year term. The three-year bond pays 0.5% over RPI while the five-year account is priced at 1.5% over RPI. There is a minimum initial investment of £500 (and a maximum of £1m) and no additional withdrawals or deposits are allowed throughout the fixed term.

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