Index Linking

Index-linking usually means 'linking something to the rate of inflation'.

So, if holders of index-linked National Savings certificates are promised a rate equivalent to inflation, as measured by the retail price index, ( RPI ) + 3%, they will know for certain that their investment will more than keep pace with rising prices.

The UK government issued index-linked bonds ( gilts ) for the first time in 1981 in which both the interest and the principal sum were linked to the RPI .

The government tends to index-link state pensions and personal tax allowances to the RPI .

Last Updated: November 2007 © Moneyextra.com

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