The savings arm of the government, National Savings & Investments, has recently announced the withdrawal of its highly popular inflation-linked savings accounts just four months since their relaunch.
The bonds, which pay an interest rate equivalent to the Retail Prices Index plus an additional 0.5 percentage points, have only ever been withdrawn one other time in their history. Harried savers had flocked to the five-year fixed rate bonds in anticipation of excellent returns with the RPI hitting 5 per cent this past July.
These bonds have been described as ‘unbeatable’ by personal and business bank account experts. The five-year inflation-linked savings products have been a welcome respite for savers feeling the heat from almost three years straight of abysmal interest rates.
NS&I had been planning to keep the bonds available to savers for the remainder of the 2011-2012 financial year. However, the government’s saving arm has not been able to do so with demand rocketing well above expectations.
NS&I was given a £2 billion revenue target by April of next year, said George Osborne in the budget. In order to meet this goal, it needed to attract approximately £14 billion in deposits, and now it says this target is close at hand.
NS&I chief executive, Jane Platt, remarked that there have been nearly 500,000 transactions of the financial instrument during less than four months. Throughout this period of time, NS&I has seen substantial amounts of capital invested into the index-linked bonds, Ms Platt continued, and the government’s saving arm has taken steps to withdraw the bonds from general sale in order to not exceed the cap on its net financing range.