Fixed Rate bonds

Fixed term bonds generally have minimum and maximum opening deposits. Some fixed rate bond accounts can be opened with as little as £1, for example, but typical minimum deposits start at about £500. Maximum deposits can go into millions, but remember only the first £85,000 will be protected by the FSCS (where applicable). You may find the most competitive rates require a larger deposit – although, this isn’t always the case. Once you’ve made your initial deposit you can’t usually add to it at a later date.

You will usually need to be 18 or over to open an account in the UK although there are some accounts which can be opened from the age of 16. Junior accounts may be available to open on behalf of children too. In most cases you will need to be a permanent UK resident for tax purposes. Some accounts are online only meaning you won’t be able to open the account over the phone, in branch or by post. Check directly with the provider you choose for specific conditions.

Thanks to the introduction of the Personal Savings Allowance in 2016, basic rate taxpayers can earn £1,000 of savings interest a year without having to pay tax, while higher-rate taxpayers can earn £500 a year. Additional rate taxpayers are not eligible for the Personal Savings Allowance. If the interest you earn goes above these limits, any tax you owe will usually be collected via the Pay As You Earn (PAYE) system or via your self-assessment tax return – unless you opt for a tax-free fixed rate ISA.

You’re unlikely to lose money on a fixed rate bond, but if savings rates rise while your money is locked away at a lower rate, you could end up feeling you've lost out on interest in better paying savings accounts. You can also face a penalty should you need to withdraw your money early. 

In some cases, you may be able to access your funds before the end of the bond term, but you’ll usually pay a penalty fee – or you’ll lose interest - for doing so. Check the terms and conditions with your savings bond provider before you sign up to avoid any nasty surprises later.  

While both are types of savings account, the main difference is that the interest rate on a fixed rate bond won’t change. In contrast, the returns on a regular savings account may go up and down as the interest rate fluctuates. You also lock your money away for an agreed period with a fixed rate bond, whereas regular savings accounts give easier access to withdraw the cash.

Fixed rate bonds usually have a short window when you open the account in which you can deposit more savings up to the maximum limit. But they are not designed for regular deposits throughout the term, so check the terms and conditions before you apply.

You can compare savings accounts using a number of factors. These include the interest rates they offer as well as how long the rate will last, the amount you might need to deposit in order to open the account, and how you can access the account. Once you’ve decided which account you want, simply click through and you’ll be taken to the provider’s website.

Not sure what type of account to go for? Our Savings Decision Tree can help you decide.

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