The Financial Services Compensation Scheme (FSCS) guarantees that it will step in to compensate the first £85,000 (£170,000 for a joint account) you have saved with a UK-authorised bank, building society or credit union in the event that the business goes bust.
If you’ve got a lump sum to save and are looking to get a better interest rate than you might get with an easy access savings account, fixed-rate bonds are worth considering – but only if you’re sure you won’t need to touch the money for a while. If that sounds like you, then as well as finding the best rates going, you’ll want to know the options and features to consider before you make your choice. So we’ve covered these here.
A fixed-rate bond is a type of savings account. When you deposit your money in a fixed-rate bond, it’s locked away; you typically can’t add to it or access it. Or if you can access it, there will be a penalty for doing so.
In return for the certainty of having your money for all that time, banks usually offer a better rate of interest than on their easy access savings accounts (where you can take out the money any time). What’s more, the rate of interest you get doesn’t change for the period of the bond as it can with an easy access account.
There are fixed-rate bonds for longer periods than one year – two, three, four and five years or more – and a few for just six or nine months.
Bonds with a 1-year term will generally pay a better rate than 9-month (or shorter) terms but a worse rate than 18-month (or longer) terms.
However, at the moment, you can actually get a better rate (5.25% vs 5.18%) on a 6-month term. If you suspect that interest rates are likely to start to come down, then you may still prefer to "lock in" for 1 years, even if it's at a lower rate.
Bonds can be a good way to ring-fence a chunk of money for a special event that’s a year or more away. But if you think you might need access to the money sooner, then there are other options.
These days, some current accounts can pay interest that rivals savings accounts, so before you head straight to a bond, see whether there are other types of account that offer more, including those that don’t tie up your money. The advantage of a bond over a current account is that many current accounts cap the amount of money that they’ll pay decent interest on. So if you have more than a few thousand pounds, and can lock away the money, it’s worth considering a bond.
Bonds have different features and eligibility criteria. Here are some key differences.
The typical minimum deposit for a bond is £1,000, although there are a few bonds with a minimum of £500 or less. The maximum deposit can go into millions.
Banks typically ask you to pay the minimum deposit within 30 days of opening the account – and will close the account if you don’t. Some accounts allow you to make the minimum deposit and top it up in the first few weeks.
If you deposit money in a bank (meaning it has a banking licence) that’s regulated by the UK’s Financial Conduct Authority, your savings will be covered to the tune of £85,000 if the bank goes bust under the Financial Services Compensation Scheme. For a joint account, it’s double that figure, so £170,000. There are a few banks which rely on a “passport” to operate in the UK and are regulated in their home country. If those went bust, you’d be relying on regulatory arrangements in the bank’s own country.
Many people don’t realise that the £85,000 is per institution, so if you have accounts in two banks that are in the same group – say, RBS and NatWest – then the total cover is just £85,000 across both accounts.
Additionally, 1 year isn’t long enough to reliably expect a return from, say, stocks and shares investments, so a fixed-rate bond trumps shares for safety in this relatively short term.
Hooray – you can access your money again! The bond has now “matured” and the provider will typically pay you the interest at this point. You can now choose whether to have your money paid into your current account, or renew with the same provider by choosing another deal that it’s offering, which may have a different rate.
This will depend on lots of factors, such as what you plan to use the money for, when you’re likely to need it, and whether you have other savings.
It’s a good idea to have some money in an easy access account in case of an emergency. Once you’ve got some savings tucked away in an easy access account, a fixed-rate bond could be worth considering if you’re sure you won’t need access to it during the year.
Fixed-rate bonds can be a great option if you want to earn interest on a lump sum that you plan to use for a specific savings goal later down the line.
Fixed-rate bonds are particularly handy when interest rates are high because they let you lock in a decent savings rate for longer”
Our best fixed-rate bonds are the highest interest rates available. To get the latest rates, we use Moneyfacts data, which covers nearly the full market of savings products and is checked and updated daily. We don’t include accounts from private banks.
All the fixed-rate bonds in our list have savings protection – for most, this is the Financial Services Compensation Scheme (FSCS). Other schemes include that of NS&I, which is 100% backed by HM Treasury, and the Gibraltar Deposit Guarantee Scheme.
| Rates up to | 5.18% AER |
|---|---|
| Number of accounts | 161 |
| Minimum investment | £1 |
| Maximum investment | £9,000,000 |
| Opening options | Branch, website, mobile app, post, telephone |
A 1-year fixed-rate bond can make sense if you have a lump sum that you want to earn interest on without locking your money away for too long. Perhaps if you’re saving for a house deposit and you know that you won’t be ready to buy a home for at least a year.
If you haven’t used your tax-free cash ISA allowance, consider fixed-rate cash ISAs (and if your lump sum exceeds the ISA allowance, consider splitting it across 2 accounts).
See what you could earn monthly, annually or at bond maturity with our fixed-rate bond calculator integrated with live bond rates.
Discover more about 18-month fixed-rate bonds.
Discover more about how monthly interest fixed-rate bonds work.
Learn more about 6-month fixed-rate bonds and how to open an account.
Discover how to find the best fixed-rate bonds and how they compare to other savings accounts.
Discover all you need to know about 5-year fixed-rate bonds, including how to find the best one for you.
If you’re planning to save your money into a fixed rate bond, we take a look at how you can find the best 2 year option.
Is smart save a legitimate company
Hi Clive. SmartSave is a trading name of Chetwood Financial, which is regulated by the FCA. Details are here: https://register.fca.org.uk/s/firm?id=001b000003Jj5LyAAJ
what is the BEST 1 year fixed rate bond available. As of now !!
Hi John,
Our table on our 1 year fixed rate bond will be able to tell you the best fixed rate bond available as of today.
Thanks,
Kate
Why do you not show or recommend any of First save banks Bonds that are on offer.
Hi John,
Applications for FirstSave Fixed Rate Bonds are no longer available, which is why we don’t show them on our table.
Thanks,
Kate
which is the best rate for me to invest £120,000
Hi. You can sort our comparison table by the interest rate to see which account in the table offers the highest rate. It’s important to be aware that with these bonds, you’re locking up your money for a year, and if you deposit more than £85,000, anything over that amount won’t be covered by the FSCS.