Compare Latest Fixed Rate Bonds
Fixed Rate Bonds - Best Buys
Why we like it: 6 month term. Interest can be paid monthly or annually. Minimum deposit £500, Maximum deposit £250,000. No withdrawals permitted. FSCS Protected
Why we like it: Minimum deposit £500. Open an account singly or jointly. Interest can be paid monthly or annually. Eligible deposits covered by UK FSCS.
Why we like it: Interest can be paid monthly, quarterly or at maturity - Minimum deposit £1,000 - Maximum deposit £200,000 - No withdrawals permitted - FSCS Protected
Why we like it: 3 year term. Interest can be paid monthly or annually. Minimum deposit £500, Maximum deposit £250,000. No withdrawals permitted. FSCS Protected
Why we like it: 4 year term. Interest can be paid monthly or annually. Minimum deposit £500, Maximum deposit £250,000. No withdrawals permitted. FSCS Protected
Why we like it: 5 year term. Interest can be paid monthly or annually. Minimum deposit £500, Maximum deposit £250,000. No withdrawals permitted. FSCS Protected
Finding the best fixed rate bond
If you are happy to tie your money up for a fixed term, a fixed rate bond might be a good options for your savings.
Fixed rate bond terms typically vary from 3 months to 5 years. Most fixed rate bond deals are for 1 ,2, 3 and 5 year terms. Generally speaking the longer your money is locked away the higher the rate of interest you will receive on your money.
How do Fixed Rate Bonds work?
- How much can I deposit? - There is usually a minimum commitment for depositing money into a fixed rate bond - usually around £500 or more, but this will depend on the fixed rate bond provider. This makes fixed bonds unsuitable for those who wish to top up a savings account in small amounts or through regular saving.
- How do I get my money back? - With a fixed term these types of savings bonds have a maturity date at which time you will be contacted by your savings provider and provided with options on how you wish your money to be returned to you - you may be given options of putting the money into a new bond from the same provider but usually on maturity you will need to decide on what to do with the money.
- If you leave the funds where they are the bond provider will normally move the funds into a low or zero interest paying account, so it is in your interests to be proactive.
- Are their access restrictions to my money?With a fixed rate bond you are usually restricted on access to your money during the specified term. Some fixed rate bond terms will not allow you access at all - while others may provide access on certain terms e.g. one withdrawal a year. It is important to check the small print before signing up.
- What is the tax treatment? - Interest paid on your savings is treated as income and you may have to pay tax on it depending on your personal circumstances. If you don’t pay tax you can receive interest gross if you complete HMRC tax form R85. Some accounts will pay interest gross and it is up to you to declare any tax owed to the Inland Revenue. Some bonds allow you to have the interest paid on maturity while others pay monthly or annually.
- What protection do I have? - Fixed rate bonds are cash deposit based and so you will get back your original deposit plus interest unless the bond provider (normally a bank or building society) finds itself in financial difficulty. In the unlikely event that this happens the Financial Services Compensation Scheme (FSCS) would pay compensation of up to £85,000 per account holder per authorised institution.
What to look for when choosing a Fixed Rate Bond
The duration that you choose to save over depends on your personal financial time frames and other budget and savings considerations. If you need rapid access to your cash, a fixed rate bond may not be the best savings option – it might be better to look at instant access or easy access accounts.
Minimum bond deposits can vary from £500 to over £10,000. Make sure you are happy to lock away cash for set period of time.
Withdrawals are either not permitted or restrictions will apply. Read the bond provider small print so that you know what you are signing up to. Some bond providers will permit one withdrawal during the bond term without penalty.
The payment of savings interest on a bond can also vary, so some offer monthly interest, others quarterly or annually, and some bond providers only pay at the end of the agreed fixed term. Choose a bond that fits in with your personal situation.
Tax is payable on interest accrued unless you are a non tax payer, in which case you can receive interest gross if you complete HMRC tax form R85. Alternatively, it is often possible to take a Cash ISA fixed rate bond (current cash ISA allowance for the 2017/18 tax year is £20,000 per individual) from which interest can be taken tax free.
Please note that the information above is based on current law and practice, which is subject to change at any time.
10 Tips for Fixed Rate Bonds
Before selecting a fixed rate bond use our tips below;
- Review different saving account options – Look at instant access to fixed rate bonds to cash isa products - All have advantages and disadvantages.
- The market changes constantly – shopping around to find the right savings deal for you. Interest rates are at an all-time low, so now more than ever you need to be proactive in getting the best rate for your money and then reviewing on a regular basis.
- Find a fixed rate bond that works for you - The choice of bond is dependent on the amount of money you intend to deposit, the rate and the length of the term. Whether you want to operate on an online account basis, postal, branch or telephone basis. Read the savings provider terms and conditions carefully.
- Read the small print – What are the access terms if there are any, what notice is required, are there any penalties for withdrawing funds, can you make additional deposits during the term, what happens to the money on maturity.
- Some fixed rate bond deals require you to have the interest paid into a current account – This may mean you have to open a current account with that provider – good to check the small print.
- Check the small print on how savings interest is paid - Whether the interest is paid monthly, quarterly or annually, it will be need to be declared if you submit a tax return. If interest is paid on maturity this may be useful for tax planning purposes.
- Sounds obvious but if you opt for an online account you will need to have internet access - Some bond accounts are offered on a postal, telephone or branch basis - check the detail.
- Check that your money is covered by the Financial Services Compensation Scheme – They will guarantee £85,000 of savings against institutional failure. Most UK banks should have this cover, but Irish or European banks that do not have a UK arm may not be covered by the FSCS.
- Maturity process - Bond providers will write to you when your fixed rate bond is due to mature. Typically, on application the provider may ask for details of your current account for proceeds to be paid into. Alternatively, monies may be paid into a holding account operated by the provider and this will probably pay no interest. It is therefore important to diarise the maturity of your bond and have in mind what you plan to do with the money.
- Tax position - If you are not a UK tax payer many savings bond providers will pay interest gross on submission of the relevant HMRC tax form.