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Santander launches new index-linked fixed rate bond

14. Dec, 2011 Categories: Business Bank Account Updates, News by Business Bank Account 0 Comments

One personal and business bank account provider has recently launched a new inflation linked fixed rate bond guaranteed to pay 105 per cent of the nation’s inflation rate for the next five years.

Linked to the Retail Prices Index, which indicated that inflation stood at 5.2 per cent this past November, the new savings product offered by the Spain-based banking giant could bring solace to those afraid that the cost of living will remain high through 2017.  However, savings accounts experts have cautioned that index linked products could prove disastrous if inflation actually drops over the next two years, as many economists predict will occur.

There are some safeguards built into the Santander saver to protect against such an occurrence.  The bond includes a buffer for minimum return with a 3.06 per cent guaranteed interest rate, even if the inflation rate drops precipitously, meaning that the minimum return on an initial £10,000 deposit today would net a total of £11,800 if the RPI drops.

The savings product will begin tracking the RPI shortly after the New Year, and will continue to be adjusted regularly through June of 2017, with maturation on August 1 of that year.  The minimum deposit needed to open the new offering is £500, and as it qualifies as not an investment product but a savings account, the Financial Services Compensation Scheme will protect any savers’ deposits – up to a total sum of £85,000 – if for some reason the Spanish bank goes belly-up.

The new savings product is exclusively available in Santander branches.

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Tags: branch, Business Bank Account Updates, fixed-rate bond, interest rates, savings accounts