Index linked savings are back!

National Savings and Investments (NS&I) index-linked savings certificates are back on sale, offering a lifeline to savers who have seen their nest-eggs eroded by inflation – currently running at 5.3% as measured by the retail prices index.

The five-year bonds allow savers to invest up to £15,000 and pay RPI plus 0.5 percentage points – making a current return of 5.8% based on the current inflation figure.

According to, the new wave of NS&I certificates beats anything on the market, with no other providers offering five-year bonds that will match or beat inflation. The best alternative is Birmingham Midshires’s five-year fixed-rate bond paying 5.05%.

The inflation-proofed bonds were withdrawn from sale in July 2010 because of excessive demand, but the government said the chancellor’s decision at the 2011 budget to increase the net financing target by £2bn for NS&I has allowed NS&I to re-introduce the savings certificates.

“The government’s policy is to encourage saving in the medium and long term. The chancellor wants to reward savers and this move does that,” said a government spokesman.

The NS&I savings certificates cannot come soon enough for older savers, who have suffered in the current low interest-rate environment. The real rate of inflation for older people has meant Britons aged over 55 faced average additional costs of £918 in each of the last three years, while consumers aged between 65 and 69 have paid an extra £1,054 a year since 2008.