Inflation linked bonds are being withdrawn by National Savings and Investments (NS&I) from 16th September, it has been announced.
Initially the NS&I said that the product was being withdrawn from September 6th and that postal applications received by midnight tonight (September 7th) will be honoured but no new applications will be accepted.
However, it has just been announced that inflation-linked bonds will still be available to new customers until 16th September.
Since the government allowed them to be introduced again, four months ago, around 500,000 people have invested in the product which gives savers protection against inflation.
However, government rules state that NS&I cannot dominate the savings market. But with the Bank of England base rate being so low, at 0.5 per cent for the last 30 months, and the Retail Prices Index (RPI) measure of inflation at five per cent, the NS&I product was one of very few that allowed savers to beat inflation.
Dr Ros Altman from Saga said: Today's announcement that National Savings and Investments has decided to withdraw inflation-linked savings bonds from sale is another bitter blow for Britain's battered savers.”
NS&I had been given the chance to bring the products back by the Chancellor, George Osborne, in the last budget when he announced that he would increase the net financing target for NS&I by £2 billion. The NS&I needed to receive inflows from savers of £14 billion to achieve this. This saw savers being able to invest between £100 and £15,000 tax free in a five-year bond with an interest rate of RPI plus 0.5 per cent.
Jane Platt, Chief Executive, NS&I, said: "During the almost four months that Savings Certificates have been on sale, there have been approaching 500,000 transactions into the latest Issue of Index-linked Savings Certificates.
"Over this period, we've seen significant amounts of money invested into these products. To ensure that we do not exceed the upper end of our Net Financing target range, we've taken the decision to withdraw Savings Certificates from general sale at this point.”
Fixed-interest savings certificates have also been withdrawn from sale by NS&I. The NS&I savings products popularity has been enhanced by being linked to a government guarantee that their savings are safe in the event of a run on a bank or building society.
Dr Ros Altman has urged the Treasury to reconsider, saying: “Until the Bank of England does actually manage to control inflation, savers will see the value of their money whittled away month after month and there will be nothing they can do to protect themselves properly.
“I would hope that the Treasury will reconsider the targets for NS&I, so that it can reintroduce these bonds in the near future once again.”
Use the Myfinances.co.uk comparison tables to find the best deal on savings bonds.
Twitter: My Finances
Join the conversation at #news_myfinances