Fixed-rate savings bonds are interest-paying savings accounts offered by banks and building societies for a fixed amount of time. You usually get a higher interest rate than from instant access savings accounts.
What’s in this guide
- Is a fixed-rate savings bond right for you?
- What types of fixed-rate savings bonds are there?
- The risk and return of fixed-rate savings bonds
- Accessing your money from fixed-rate savings bonds
- Are fixed-rate savings accounts safe and secure?
- Where to get a fixed-rate savings account
- Tax and fixed-rate savings bonds
- If things go wrong with your fixed-rate savings bonds
- Useful tools
Is a fixed-rate savings bond right for you?
Did you know?
These are also known as ‘fixed rate savings accounts’, ‘fixed-rate bonds’ or ‘fixed-term deposits’.
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.
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.
Find out more at the FCA about structured productsOpens in a new window
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.
Find out more about how inflation affects savings in our guide Inflation – what does it mean for your savings
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 £120,000 (or £240,000 for joint accounts) per authorised firm.
Find out which banks are part of which authorised firmsOpens in a new window on Which?
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 £1.4 million are covered for 6 months, such as money from the sale of a house.
Find out more in our guide Compensation if your bank or building society goes bust
Where to get a fixed-rate savings account
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 onlineOpens in a new window
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.
Find out more about using comparison sites to find a savings account in our guide Get the most out of comparison websites
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 within a tax-free ISA.
