Fixed-rate savings bonds

Is a fixed-rate savings bond right for you?

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A fixed-rate savings bond might be for you if:

  • you have £100 or more in cash that you don’t need instant access to for at least six months or the term of the bond
  • you want a potentially higher return than on your regular savings account
  • you don’t want to risk losing any of your money (which you could do with investments).

What types of fixed-rate savings bonds are there?

Fixed-rate savings bonds guarantee a set interest rate over a specified term – most savings accounts pay a fixed amount of interest.

Bonds usually pay interest annually, but some account will pay this interest quarterly or monthly. You can often nominate a separate bank account for the interest to be paid into.

Tracker Bonds track a particular index or rate – for example, inflation or Bank of England base rate – over a set period of time. This could be from six months to five years.

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Although the minimum investment for some savings accounts is £1, the minimum deposit is usually £100, with a maximum typically of £1,000,000. Interest rates will sometimes have levels that increase the more you can save into the account.

Structured deposits are sometimes advertised as savings bonds. They often promise higher returns, but carry more risk than traditional savings bonds.

Make sure you understand what you’re buying.

The risk and return of fixed-rate savings bonds

  • You get your original capital back at the end of the term, plus any interest you’ve earned.
  • These products tend to offer higher interest rates than instant access accounts. The longer you can afford to lock your money into one of these accounts, the higher the interest rate is likely to be.
  • With fixed-rate savings bonds you know at the start exactly how much you’ll get when the term of the account ends (when it ‘matures’).
  • Your original investment won’t hold its value in real terms (its ‘buying power’) if the interest you’re getting is less than the rate of inflation over the investment period.
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If the bond you’re considering is a structured deposit, the risks will be different.

Accessing your money from fixed-rate savings bonds

  • These products usually require you to tie up your money from between six months and five years.
  • There can be big penalties for early withdrawal. So make sure you know what these are and have budgeted to make sure you can afford not to have instant access to your cash.
  • In some cases, you might not be allowed to access any of your money in the account until the end of the term – so check the facts before you commit.
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Are fixed-rate savings accounts safe and secure?

Cash you put into UK banks or building societies (that are authorised by the Prudential Regulation Authority) is protected by the Financial Services Compensation Scheme (FSCS). The FSCS savings protection limit is £85,000 (or £170,000 for joint accounts) per authorised firm.

It’s worth noting that some banking brands are part of the same authorised firm. If you have more than the limit within the same bank, or authorised firm, it’s a good idea to move the excess to make sure your money is protected.

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Where to get a fixed-rate savings account

You buy savings bonds directly from a bank or building society or the NS&I. Usually, accounts are released in limited ‘bonds’, so make sure you keep an eye out for good deals.

Buy online, through a branch, by post or over the phone – depending on the product and provider.

Comparison websites are a good starting point for anyone trying to find a savings account tailored to your needs.

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These websites are good place to start when you’re looking for a savings account:

But be aware that comparison websites won’t all give you the same results. So make sure you use more than one site before deciding.

It’s also important to do some research into the type of product and features you need before making a purchase or changing provider.

Tax and fixed-rate savings bonds

Interest on your savings is paid gross, and you might have to pay tax on it if it’s above your Personal Savings Allowance.

Some savings bonds are available as tax-free ISAs.

If things go wrong with your fixed-rate savings bonds

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Looking for us? Now, we’re MoneyHelper

MoneyHelper is the new, easy way to get clear, free,
impartial help for all your money and pension choices.
Whatever your circumstances or plans, move forward with MoneyHelper.

Continue to website
Looking for us? Now, we’re MoneyHelper

MoneyHelper is the new, easy way to get clear, free,
impartial help for all your money and pension choices.
Whatever your circumstances or plans, move forward with MoneyHelper.

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