Kent Reliance Building Society (krbs) has become the latest amongst a number of providers to offer an inflation-linked ISA.
The krbs five-year ISA promises to pay investors 2 per cent plus the change in the Retail Price Index (RPI) between this April and April 2016. If inflation were to rise from its current 5.5 per cent to 6 per cent, savers would see a return of 11 per cent. However, if inflation doesn’t grow their return would only be 2 per cent.
The ISA account has a minimum investment of £2,500 and money from previous years’ ISA accounts can be deposited. No further deposits or withdrawals to or from the ISA are then allowed, unless savers want to transfer the entire ISA to a new fund altogether.
Michelle Slade of Moneyfacts said, "The krbs Isa relies on growth in the RPI to top up the initial rate of 2 per cent. Currently, RPI inflation stands at a 15-year high, with most analysts expecting it to fall back in the coming years. If inflation does fall then savers would have been better off opting for a standard five-year fixed rate Isa, where the current market leader pays 5 per cent."
