GP savers everywhere can rejoice. The government announced on 12 May that National Savings and Investments (NS&I) five-year index-linked certificates are back.
Ideal for cash savings, index-linked certificates offer inflation-beating tax-free interest and a money-back guarantee.
But hurry. Once the Treasury has raised its net financing target from NS&I of £2 billion for 2011/12, this issue of index-linked certificates is likely to close to new business.
The interest rate you earn will be 0.5 per cent above the inflation rate as measured by Retail Price Index (RPI). The minimum investment in these five-year certificates is £100 and the maximum is £15,000.
The interest earned varies over time depending on the RPI. For example, using the March 2011 figure would give a rate of return of 5.8 per cent if held to maturity: the RPI rate of 5.3 per cent rate plus 0.5 per cent.
Based on the March 2011 inflation rate, the gross equivalent interest rates are 7.25 per cent for GPs paying basic rate tax, but 9.67 and 11.6 per cent respectively for higher rate (40 per cent) and additional rate (50 per cent) taxpayers.
NS&I index-linked certificates pay no income and the tax-free interest is added to their value at maturity. But do note that tax rules may change and these certificates' value depends on your circumstances.