The bond is guaranteed to beat inflation by 3% and any early investment, prior to strike date on December 1, 2007, will receive interest equivalent to the Bank of England base rate credited on November 30, 2007.
The inflation rate is the percentage difference between retail price index (RPI) on two dates. So, if the RPI in August is 207.30 and the following August is 215.74, the percentage change in RPI and the inflation rate over the period is 4.07%. In this scenario, inflation is 4.07% and Leeds Building Society’s Inflation Buster Bond would pay a return of 7.07%.
If the rate of inflation is 4.07% a year over the term, an investment of GBP10,000 made on August 29, 2007 will have a pre-tax maturity value of GBP11,554 after two years. This is made up of GBP79 for early investment and GBP1,475 from the RPI inflation rate.
Paul Riley, head of group treasury at Leeds Building Society, said: The demand from customers for this bond has been overwhelming and, as a result, we are now launching a third issue. The annual change in RPI was 4.1% in August, which is an increase on the previous month. This product provides excellent peace of mind with the inflation link, so no matter what happens, customers will receive a guaranteed real return.
The bond is ideal for investors looking for a competitive return and is available on a minimum operating balance of only GBP1,000. If the Inflation Buster Bond had been available in earlier years, it would have outperformed the average UK savings rate by 1.57% in 2005 and 2.08% in 2006.
