Fixed-rate savings bonds

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.

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.

Although fixed-rate bonds usually won’t allow you to add further funds once you’ve made your initial deposit.

Make sure you understand what you’re buying.

• 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.

• 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.

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.

Certain qualifying temporary high balances up to £1 million are covered for 6 months, such as money from the sale of a house.

You can buy savings bonds directly from a bank or building society or National Savings and Investments (NS&I). You can invest in NS&I bonds online via their website.

Depending on the product and the provider, you can save in some fixed rate savings products online, through a branch, by post or over the phone.

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

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

• Which?
• MoneySavingExpert

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.

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 within a tax-free ISA.