Principality Building Society has a new inflation linked savings account with the interest rate linked to changes in the Retail Price Index (RPI).
The new Protected Capital Account, managed by Credit Suisse, pays interest based on changes in the Retail Prices Index (RPI – used by the government as an index to measure inflation) plus an annual enhancement of 0.20%, over its five year investment term.
The account is for 5 years and interest is calculated annually based on the positive or negative change in RPI. An additional 0.2% will be added each year to ensure savers keep pace with inflation.
The minimum investment for this savings account is £3,000 and the maximum £85,000.
If not already used, this years Cash ISA allowance can be invested into the account as long as this is done before 5 April. Savers whose funds clear before 5 April 2011(11th April 2011 for deposits using the 2011/2012 ISA allowance) and hold the Account until the end of its term will get an additional bonus of 0.50%.
The 2011/12 ISA allowance can also be invested in the account and ISA transfers are also allowed.
Paul Straiton, Principality’s Product Manager, said: “We understand that some savers are concerned that the level of inflation is eroding the value of their savings, particularly as RPI has recently hit a 20 year high. For the first time we are delighted to offer savers an inflation beating home for their cash.
He added “If savers invest using their cash ISA allowance they can also protect their returns from income tax and capital gains tax, giving extra benefit to all tax payers but particularly to higher rate tax payers.”
MoneyHighStreet.com comment: Picking up the point re investing in this account with your Cash ISA allowance, this is something well worth considering. Be aware though that to get the best ISA deal to meet your needs you need to shop around and check beyond the headline rates. Don’t leave existing ISAs in a low rate account either. Check the rates you are getting and if need be switch to a better paying account.