New RPI-linked Bond launched by Tesco Bank

Wed, 30 Nov 2011
 
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Tesco has launched a second issue of its popular inflation-linked bonds for investors seeking real returns.

Aimed at retail investors, the Tesco Bank Retail Price Index (RPI) Bond pays interest twice yearly at a 1 per cent annual gross rate, which is adjusted to take into account of changes to the RPI.

The capital value will also be uprated in line with the RPI, meaning on maturity investors will get back the full value of the bond plus any overall increase in RPI over the eight-year term.

Issued in multiples of £1, the bond has a minimum investment of £2,000 and can only be bought through stockbrokers and wealth managers. It can be held within a stocks and shares ISA (Individual Savings Account) or a SIPP (Self Invested Personal Pension ).

The new product follows Tesco Bank’s first inflation-linked bond issue this year, and comes after RBS unveiled a 7-year inflation-linked bond paying 2 per cent adjusted for RPI.

Savers interested in these corporate bonds should remember that they are not covered by the Financial Services Compensation Scheme (FSCS), meaning that if the providers (in this case, Tesco bank) were to default or become insolvent, they could lose some, or all of their investment.