Thanks to soaring inflation, savers have begun to clamour for the return of high interest savings accounts in the form of index-linked savings certificates from the NS&I.
The government backed schemes, which pay a tax-free guaranteed inflation-busting return over a fixed term, were withdrawn in July of 2010. However due to rampant inflation growth savers are lobbying long and hard for their return.
Recent inflation figures revealed that the Retail Prices Index rose to a new high of 4.8 per cent this past December. This is more than one percentage point higher than the more conservative Consumer Prices Index, which also rose to 3.7 per cent last month. The index-linked certificates that are currently maturing represent the 39th issue of the five-year term certificates, which pay inflation plus an additional 1.05 per cent interest rate. The 15th issue of a shorter-term three-year certificate has also matured which offers inflation plus 1.35 percentage points in interest.
The maturation of a five-year certificate in which a saver had invested £10,000 would be worth £12,325 today, all of it completely tax free. This equates to after-tax interest rates of 5.33 per cent for those paying the basic rate – or 7.11 per cent for a higher-rate tax payer.
Those who hold maturing certificates have the option of rolling over their money into new issues paying RPI plus one full per cent in interest. However NS&I have declined to make these attractive rates available to new savers since they rescinded the offerings last July.
The savings certificate withdrawal had been intended to be temporary, says Jane Platt, chief executive for NS&I. Ms Platt stated that cash had been been flooding into the certificates and the government had told the personal and business bank account provider to use maturing money to match new deposits.