Tax-free inflation-protected deposit scheme (UK) still available!

Now that NS&I has withdrawn inflation-linked Savings Certificates, the Mail on Sunday looks around for alternatives. I’ll give them a slightly closer look here, with links for you to click through. Please note that Yorkshire Building Society has a cash ISA version that means returns are tax-free even if you are a taxpayer!

1. Post Office Inflation Linked Bond – N.B. closing date 16 September (or earlier if fully subscribed)

• Single lump sum investment, £500 min., £1 million max.
• 3-year term: RPI+0.5%, annually, OR…
• 5-year term: RPI+1.5%, annually
• Backed by Bank of Ireland.
• RPI adjusted once a year in August, according to UK Office of National Statistics RPI index.

Drawbacks:

• No withdrawals allowed during the term
• Interest is taxable (but remember that you or your partner may not be a taxpayer)

2. Cambridge Building Society Inflation Linked Bond Issue 1 - N.B. closing date 15 September (or earlier if fully subscribed)

• Single lump sum investment, £5,000 min., £85,000 max.
• 5-year term: RPI+1.0%, annually
• Runs from 16 Sept 2011 to 16 Sept 2016
• RPI calculated according to UK Office of National Statistics RPI index over the investment period

Drawbacks:

• No withdrawals allowed during the term
• Interest is taxable (but remember that you or your partner may not be a taxpayer)

3. Yorkshire Building Society Protected Capital Account (PCA) Inflation Linked 8 Plan – N.B. closing date 15 September (or earlier if fully subscribed)

• Single lump sum investment, £3,000 min., £85,000 max.
• Managed by Credit Suisse International on behalf of Yorkshire Building Society
• 6-year term: greater of RPI and 16%, i.e. minimum return is 2.5% p.a. even if inflation is zero or negative!
• RPI calculated according to UK Office of National Statistics RPI index over the investment period
• Can also be accessed as a cash ISA (max. £5,340), for tax-free returns
• Can transfer other cash ISAs into YB inflation-linked cash ISA
• Can invest in cash ISA as well as non-ISA bond

Drawbacks:

• Early exit fees apply
• Interest is taxable (but remember that you or your partner may not be a taxpayer), UNLESS you opt for the CASH ISA VERSION

4. Santander Inflation Linked Bond Issue 5 - N.B. closing date 5 October (or earlier if fully subscribed)

• Single lump sum investment, £500 min., £2 million max.
• 6-year term: greater of 105% of RPI (over the term) and 8%, i.e. minimum return is 1.29% AER p.a. even if inflation is zero or negative!
• RPI calculated according to UK Office of National Statistics RPI index over the investment period

Drawbacks:

• Early exit fees may apply – contact issuer for details on 0845 765 4321
• Interest is taxable (but remember that you or your partner may not be a taxpayer)

INVESTMENT DISCLOSURE: None. Still in cash (and index-linked National Savings Certificates), and missing all those day-trading opportunities.

DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.

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