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Is an AA fixed rate bond right for you?

Fixed rate bonds let you earn a guaranteed level of interest on your savings in exchange for locking your money away for the term of the bond. For smaller sums, it is usually better to keep your money in a savings account as these generally offer better rates of interest, but only up to a certain deposit limit.

For example, RCI Bank and Post Office are offering 1.30% on their savings accounts.

Fixed rate bonds will generally have a much higher maximum threshold on which they pay interest and can be set up in parallel with your current account, so should not affect your day-to-day banking.

Commonly, fixed term bonds will run for 1 year, 2 years, 3 years or 5 years and the longer the bond runs for, the higher the interest rate it will usually pay. You may have the option to withdraw funds early if necessary, but will usually have to sacrifice some of your interest payments in exchange.

If you have savings which are not currently earning interest, it is worth bearing in mind that they are likely to be decreasing in real world value due to the effects of inflation. Placing your savings in a fixed rate bond can help protect (and usually increases) the value of your money.

Compare AA fixed rate bonds

The AA offer a number of different savings accounts that are deposited with the Bank of Ireland UK. As an alternative to fixed rate bonds, they are currently offering their customers fixed rate ISA, which also offer a guaranteed interest rate in exchange for not being able to access your money for a fixed term.

ISAs differ from fixed rate bonds in that the interest you earn from them is tax-free, up to a yearly limit set by the government. For 2017/18 that limit is £20,000. This can make an ISA an attractive option to use for at least part of your savings. Find out more about ISAs here.

Getting the best deal on fixed rate bonds

Exactly which products different institutions provide changes all the time, as well as the interest rates and other features offered with those products. This is a reflection of the ever-changing market and consumer demand.

Our comparison table at the top of the page is regularly updated with all the latest and best deals on fixed rate bonds. This makes it easy to keep track of where you can get the best value for your money right now.

Before investing in a fixed rate bond, make sure you carefully assess your own financial circumstances and the level of return you would like to receive. This should make it much more likely that you will find a product that you are happy with long term.

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From January 2018 over 900,000 people who invested in pensioner bonds will start to see their bonds mature. Savers who have been enjoying 4% pa are going to get a shock when they look for comparable returns from cash in the current market. We have put together 5 ideas for your cash in 2018

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