With the Consumer and Retail Prices indexes running at 4.5% and 5.5% respectively it can be hard nowadays in these times of historically low Bank of England base interest rates to find a savings vehicle that matches let alone beats inflation.
Last year NS&I (National Savings and Investments, for UK state savings schemes) dropped their very popular and long running index linked investment for new savers that rewarded investors with 1% above the higher RPI. The reasons given at the time were that other banks could not compete and lobbied for a change on unfair competition grounds and that the bond's generosity placed a burden on the taxpayer.
But just after the budget yesterday it was announced that they would soon be coming back. But whether they will be as generous as 1% above RPI is open to question.
But even a very modest rate above inflation will come as very welcome news to many hard pressed savers who have seen the value of what little they may have managed to put aside continually eroded by inflation, especially pensioners with small savings pots. Any new issue will be snapped up while the ink is still wet on the certificates.
At the moment, using RPI as the measure (but remember the government's preferred measure is the international standards based CPI) a basic rate taxpayer needs a return of 6.87% before tax just to tread water financially speaking. For higher rate taxpayers this is a steep 9.17%. We have not seen any financial products with these sorts of returns for many a year.
It would be nice if savers could once again start to gain from their savings but the banks may well cry 'foul' again. There again the government may tell the banks to sort their acts out and start giving savers proper returns once more.
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