Putting your money away for a fixed period can be a great way to guarantee a better return and if you want to be able to review your savings on an annual basis a 1 year bond could be the ideal choice.
1 year fixed bonds guarantee the return you’ll get on your money for a year but allow you to move your savings after a 12 months period providing a good compromise between rate reassurance and flexible access to your money.
If don’t want to lock in to a fixed rate savings account for the long term as as you're worried you may miss out on interest rate rises in the near future but want a better interest rate than those offered by instant access or notice savings accounts, a short term 1 year fixed rate bond could prove to be the best option.
Is a 1 year fixed rate bond right for me?
Before opening a one year fixed rate bond you need to ask yourself if a one year period is a suitable length of time for you to stash away your cash.
Are you happy locking your money away?
Most fixed rate bonds place restrictions on access to your money so once you open a 1 year bond you are unlikely to be able to access your savings without incurring steep interest charges or possibly closing your account and forgoing much of the interest you’ve earned.
Needless to say you also need to consider whether you can afford to tie money up in fixed rate bonds 1 year savings accounts without access for the next 12 months. If you are unsure then it’s best to play it safe either by keeping some or all of your money in a savings account that allows access.
Are fixed rates the best solution?
Although the 1 year fixed rate accounts you choose may be the best 12 month savings accounts around at the time you open them, because the interest rate is fixed for a year if savings rates rise elsewhere you could miss out as you will be unable to move your money.
While this may not be as big a concern when compared to longer term fixed rate bonds this inflexibility is still something you should consider when comparing 1 year fixed rate bonds best rates against the accessible alternatives available.
Of course, if interest rates fall after you open your account, the best 1 year fixed rate bond rate you’ve chosen will prove to be even more attractive.
You also need to consider your plans for your savings after the 12 month term ends.
As the rate of interest paid on your savings after the account term ends is likely to drop considerably you need to make a note to search for new fixed rate savings accounts 1 year from now if you want to keep the return on your savings profitable.
Choosing the best 1 year fixed rate savings accounts
Getting the best 1 year fixed rate bond can make a big difference to the amount your money will earn in interest over the 12 months it’s held in the account. You can compare the best one year fixed rate bonds currently available by using our 1 year fixed rate bond comparison table , which allows you to re-order the accounts by a variety of factors, including the interest they offer.
What are the other options?
If you are happy to put your money away for a longer period of time then you may want to seek a better interest rate by considering a 2 or even a 3 year fixed rate bond.
Alternatively you may want to check if you can get a similar return on your money from a notice savings account or instant access account, especially if you are undecided whether locking your money away without access is the best choice.
If you are yet to use you annual Cash ISA allowance then you should consider putting your money into a fixed term ISA account rather than a 1 year fixed rate bond.
This is because it will ensure that you keep all the interest that you earn rather than having to give a cut to the taxman.
But remember, as with bonds, when you open 12 month ISAs with high interest savings accounts 1 year later you may need to switch to a new account to continue to get a decent rate.
As with fixed rate bonds you can choose exactly how long you are happy to tie up your money, so if you decide you are happy to put your cash away for longer there are accounts that last for up to 5 years.