National Counties Building Society recently announced the launch of its new no-tax savings account, but the supposedly inflation-proof financial product does come with some strings attached.
Designed as a five year ISA offering paying an annual interest of 1 per cent, National Counties’ new savings account will also adapt to any changes in inflation as reflected in any changes in the retail price index, or RPI.
The catch, however, is that building society customers have to maintain a minimum balance of £5,100 in the ISA, which is the maximum allowance for this year. An additional limitation on the account is that savers can’t add or withdraw their funds throughout the entire term of the investment.
The financial product’s terms are such that savers will receive a return of 1 per cent annually in addition to an adjustment that reflects the change in the RPI this coming September; if the price index remains at its current figure of 5 per cent, the annual investment return would be 5.82 per cent, after utilising the Annual Equivalent Rate adjustment basis.
In the event that the RPI would reverse itself and decline into negative figures, such as it stood for the majority of last year, any savers utilising National Counties’ ISA would still be entitled to their 1 per cent annual return rate.
The new financial instrument is available to new customers in addition to existing ones who desire to transfer funds from a previously-accumulated ISA to this new product.
National Counties is the only remaining building society that currently offers savers an inflation-proof savings option after the taxpayer owned NS&I retracted the entirety of its similar products this past July.
National Counties is offering their new product until the end of September; the availability has been severely limited, however, so a large demand for the ISA will undoubtedly shorten that time frame considerably.
National Counties’ chief executive John Milton commented on the new offering, stating that the building society wanted to provide an opportunity to consumers to guard their savings against the ravages of a high inflation rate. Mr Milton also commented that the attractiveness of National Counties’ new product will be high, especially since NS&I has left the market for such financial instruments.