Saving: fixed-rate accounts

Saving: fixed-rate accounts

18 July 2013
Reading Time: 6 mins

Locking your money away in a fixed-rate accounts is a good thing to do if you’re looking for a guaranteed rate of return – and with some banks now offering more than 2.5% AER for four to five-year terms, it may be a wise time to consider this kind of investment. It is worth bearing in mind, however, whether you really want to lock your money away for such a long time. Read on for our simple guide to savings bonds as well as checking out the latest fixed-rate deals.

What are savings bonds?

Fixed-rate savings bonds (also known as term accounts, or simply fixed-rate savings accounts) are in many ways similar to other types of savings account. The main difference is that with savings bonds, you agree to tie your money up for a certain amount of time, generally in return for higher-than-average interest rates.

How long does the fixed-rate period last?

A bond can be short-term, lasting between six months and one year. Alternatively, it can be longer term, lasting for between one and five years.

Can I add money during the fixed-rate term?

A few savings bonds will allow you to add money during the term, but the majority will only allow you to put money in at the very start.

Can I take money out?

Once you’ve set up the account, you shouldn’t take any of the money out until the end of the bond period.

If you need the money in an emergency you may be able to get at it – but you’ll have to pay an interest penalty.

How is the interest paid?

While you have the money invested you can usually choose how to receive the interest – either monthly or annually. With some savings bonds you can also choose (at the end of the term) whether to take the money out or to re-invest it.

How much money do I need to put in?

It depends. Minimum savings bond contributions can range from a mere £1 to £10,000 or even more. There may also be a maximum amount that you’re allowed to put in.

How do I put money in?

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