PO inflation-linked bonds create interest payment issues

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Post Office inflation-linked bonds create interest payment issues

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Confusion over a Post Office holding account and interest rates for inflation-linked bonds is solved, in the fine print

My wife and I, both pensioners, invested £52,000 in a number of three- and five-year bonds with the Post Office. These are linked to RPI plus 2.5% in the case of the five-year bonds. The Post Office held our money in a holding account, earning around 2%, for up to four months before transferring it to the inflation-linked bonds. As a result we calculate we lost £750. Can you help? GC, Epsom, Surrey

With interest rates on savings accounts in the doldrums, investors have been keen on ways to earn more from their money and inflation-linked bonds have become a popular option.

Each issue of the Post Office bond you applied for was subject to an "offer period". During this time people can apply for an account and the money is held in a holding account, where it earns a fixed rate of interest (2.5%). You took up one bond offer in July last year and your money was held here until the start date of the bonds in October. In another case you took up the offer in October and the bond started in February this year. It is not until the start date that the capital and interest earned in the holding account is invested in the inflation-linked bond.

The Post Office said it is sorry if you do not think this was made sufficiently clear to you but says that it is spelt out in the product literature that accompanies the bonds. It has sent us a copy of this literature and, although the leaflet is wordy, there is a Q&A section where the details of the holding account and the start date are clearly laid out.

We can only conclude, therefore, that you misunderstood the product but, in any case, your money is now earning a decent rate of interest in the current climate.