NEW: Inflation Tracker (Birmingham Midshires) Now 1.5% AER above RPI

opinions4u

This one slipped out quietly!

Not an ISA product, but gives RPI protection to a non-taxpayer. Rate is RPI plus 0.25%.

Note that interest isn't accrued, it's paid away from the account annually.

http://www.bmsavings.co.uk/savings/index-linked-savings/682/5-year-inflation-rate-bond-issue-1.aspx

Access – is not permitted during the 5 year term. If you're unable to commit to a 5 year term or require access to your savings this account isn't the right account for you

Limited issue – this account has a limited amount of money that can be invested in it. The issue will close on 10 March 2011 or earlier if the limit is reached

Initial deposit – to take full advantage of this offer, your initial deposit should be for the full amount you'd like to invest. Once the issue has closed you can't add any more money

Interest – will be credited to your nominated account every year on the anniversary of the start date. Interest may take up to 4 bank working days to reach your nominated account. The interest cannot remain in your inflation rate bond (issue 1)

Taxation – means the annual net return on your savings could be less than the rate of inflation

Maturity instructions – your account will mature on the 28 March 2016. We'll write to you at least 14 days before this date with your options

ultrawomble

Interest is not compounded though......

Interest – will be credited to your nominated account every year on the anniversary of the start date. Interest may take up to 4 bank working days to reach your nominated account. The interest cannot remain in your inflation rate bond (issue 1)

Cautious_Investor_3

It's Friday and I am being thick, do they take the average RPI figure to January or the actual RPI figure in January?

The Cautious Investor

opinions4u

This link says:

Interest received will be based on the January RPI Annual Inflation Rate. You can keep track of RPI by visiting www.statistics.gov.uk/hub/economy. Past performance is not a guide to future performance.

And this link says:

6.3. On your Interest Payment Date you will receive the RPI Rate for the month that is two months before your interest payment is due (as long as this rate is greater than zero). For example, if your Interest Payment Date is in March, you will receive the RPI Rate for January, which is typically published in February.

soulsaver

From their webby:
Deposits in Birmingham Midshires or BM Savings branded accounts are held with Bank of Scotland plc. Accounts with Bank of Scotland plc include accounts with its divisions and trading names: Halifax, Intelligent Finance, Bank of Scotland, Bank of Scotland Private Banking, Bank of Scotland Germany, Bank of Scotland The Netherlands, Bank of Scotland Treasury, Lloyds Bank Corporate Markets, Lloyds TSB Corporate Markets, St. James's Place Bank and St. James's Place Private Bank. Some savings accounts under the AA Savings, Saga and Charities Aid Foundation brand names are also deposits with Bank of Scotland plc. An eligible depositor's £85,000 limit relates to the combined amount in accounts under all of these names

plunt

im very tempted with this. the only issue is although there may be no other products like this around currently, i reckon in a year or so the market will have a few more options. making the banks compete for us.... thus offering rpi + some .

opinions?

Loughton_Monkey

This was well spotted. Well done!

Although superficially a good product, I am not too sure it would prove to be a winner. We have to take a view on inflation. Assuming no further VAT rise next year [surely not!] then January 2012 inflation is set to dive 2% below what it otherwise would have been.

Add on to this the 'certainty' that interest rates will rise - almost certainly within 12 months - and very probably in steps after that. I guess we have to take a view as to how successfully 'Merv' will kill inflation.

I can see this scenario:

1. Inflation (as we know it now) probably rise to 6% by December? If so, then down to 4% for January 2012. So Year 1 Interest = 4.25%.

2. Base Rates start to move, say, April. I think once it has 'started', we would tend to see 0.25% added for a few months after. So it's easy to see Base Rates up by 2% by December. I don't think that would automatically mean savings rates up by 2%, but you could be looking at 'instant' rates of 3.5% and 12 month fixes for around 3.75%

So at 1st anniversary, you would certainly be 'ahead' but I wonder the degree to which we would view the following 4 years? Especially as we approach next election?

In other words, I can see a scenario, perhaps, when halway through, you are looking at this product paying you 3.5%, but 5% being freely available in the market. Probably looks a bit sick then?

MarkyMarkD

It is stupid to put all your money in an account like this, unless the only thing that you care about is protecting your assets against inflation. Which, according to some, is all they care about.

But I think it makes a sensible product in which to invest part of a mixed selection of cash investments. If inflation is very high over the 5 years, it'd be good to have put (say) 25% of your money into one of these. And if inflation is very low over the 5 years, you will have done well out of traditional fixed rate bonds on the other 75% of the money, as you'll have earned a positive after-inflation return.

The fact that interest is paid away is rather academic.

opinions4u

Now tracking at 1.5% AER above RPI.

http://www.bmsavings.co.uk/savings/index-linked-savings/682/5-year-inflation-rate-bond-issue-1.aspx?WT.ac=BMILSIRB-682

As this is still "issue 1" I assume the 1.5% applies to existing accounts where 0.25% was the advertised track.

alanq

"This new fixed rate of interest is open to both new and existing customers and those already invested in the bond have been told they will automatically receive the increase in rate. The offer period has also been extended to 21 March 2011, so savers can take advantage of the rate."
http://www.whatinvestment.co.uk/banking-and-savings/cash-accounts/1606683/lloyds-banking-group-increases-bm-bond-rate.thtml

Definitely better than the PO.