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ISA/BOND

LEEDS BUILDING SOCIETY

Type: Inflation beating Isa and bond

Description: Leeds Building Society has launched its sixth Inflation Buster Isa and ninth Inflation Buster bond. Commencing 1 October 2008 and maturing on 30 September 2010, both products will pay an annual interest equal to the percentage change in the Retail Price Index plus a 225 basis point premium.

Conditions: The minimum investment for both products is £1000. The maximum allowed in the ISA is £3600 plus any investments from previous years, including interest while the bond accepts investments of up to £1m.

Withdrawals are permitted with the Isa. Withdrawals made on or before 30 September 2008 will receive a Bank of England base rate while withdrawals made between 1 October 2008 and 30 September 2009 will receive interest credited on 30 September 2008 plus 2.25 per cent. Capital withdrawals are prohibited on the bond.

Verdict: The 225 bps and two-year term makes the offer quite attractive when benchmarked against other RPI-linked savings products such as that offered by National Savings and Investment.

While inflation has the potential to taper off over the longer-term, it gives savers an opportunity to earn good returns at least in the first year as inflationary pressures persist.

Although it may lack the implicit capital security unlike investments held with the NS&I, and with recent bail outs of building societies still fresh in memory, there is little cause for concern over the solvency of the Leeds Building Society. In any case, investors have some measure of security through the Financial Services Compensation Scheme.

Contact: www.leedsbuildingsociety.co.uk

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