By finding the best fixed rate bonds, you'll be able to watch your savings grow.

You'll often find that the best fixed rate bonds pay higher interest rates that you might get with an easy access account or notice account.

What are fixed rate bonds?

Fixed rate bonds are a type of savings account, and are often known as savings bonds.

They tie up your money for a set length of time, known as a 'term'. You'll need to be sure you won't need your money during the term. Then, you're paid a fixed interest rate for the duration of the term of your fixed rate bonds.

You're guaranteed this interest rate until your bonds 'mature', and it's usually higher than with an easy access account. That's because the bank knows it has access to your money for a set period of time and you're not suddenly going to withdraw it.

An important thing to note about fixed rate bonds is that you can often only deposit your money into them once. So you'll need to put it all in in one go.

How to find the best bond rates

When you're looking for the best fixed rate bonds, there are a few things to think about.

Before you start comparing the best bond rates, ask yourself the following questions:

  • How long can you leave your money untouched? Some fixed rate bonds don't let you access your cash until the end of the term. Check carefully.

  • What's the interest rate? The best fixed rate bonds come with higher rates of interest. This means that if you find the best bond rates you'll get more for your money.

  • How much do you want to save? Some fixed rate bonds can be opened with as little as 1 whereas others need a lot more.

  • How often do you want your interest to be paid out? The best fixed rate bonds let you choose whether to have the interest paid yearly or monthly.

Are bonds the best fixed rate savings option?

Usually, fixed rate bonds offer better interest rates than you'd get with other, more accessible, savings accounts. That's the main reason people have fixed rate bonds - because they feel they're the best fixed rate savings option available. You can usually get a decent amount of interest on a large sum of money.

The other good thing is that you can have as many fixed rate bonds as you like. Just remember that with fixed rate bonds, you often can't take any money out, or put any money in, during the fixed term. And you'll have to stay on top of how much you're earning in interest in case you exceed your Personal Savings Allowance. T
here's more on this below.

What are the best fixed rate bonds?

There are two main types of fixed rate bonds.

Normal fixed rate bonds give you a fixed interest rate for the term of the bond.

Tracker rate bonds give you a fixed interest rate, at an agreed level above the Bank of England base rate. For example, it could offer a rate of 1% higher than the base rate, until the end of the term. In that example, if the base rate is 0.10%, you'd be offered a rate of 1.10%

The best fixed rate bonds are the ones that best suit your circumstances. When you compare fixed rate bonds, you'll be able to find the best bond rates for your financial goals.

You might also like to look at another type, called a tax-free fixed rate ISA bond.

How is interest paid on fixed rate bonds?

With most fixed rate bonds, your interest is paid out every year. This means you can benefit from compounding interest over time. Compounding interest is where, if your interest isn't paid out, it gets added to the total sum. That means you earn interest on a bigger sum of money.

Some bonds, however, require the interest to be paid immediately, into a separate current account. This means you don't benefit from compounding the interest.

Other fixed rate bonds only pay the interest at the end of the term when the bond matures. And others pay it monthly, so you get it as an income until the bond matures.

Once I find the best bond rates, will I have access to my money?

This depends on which of the fixed rate bonds you choose, but usually you don't have access to your money.

Fixed rate bonds tend to give you a fixed interest rate for a set amount of time (such as a year). You can generally only access your money when the fixed term ends.

If you do find fixed rate bonds that give you access to your money, it's likely that you'll pay a penalty if you need to access it. The penalty could be, for example, 90 days' worth of interest, although it could be as much as a year's worth. You usually have to close your bond if you take your money out early, too. These fixed rate bonds also give a fixed interest rate for a set amount of time (such as a year).

With the best fixed rate bonds, what term lengths can I get?

You've probably heard of 1-year fixed rate bonds, 2-year fixed rate bonds and 3-year fixed rate bonds. But, actually, fixed rate bonds come in a range of different terms, all the way up to 5-year fixed rate bonds or even 7-year fixed rate bonds.

Some fixed rate bonds have a set maturity date. This could be '30th April in four years', for example, rather than four years after the date you open the account.

The best fixed rate bonds - short term

You can also find fixed rate bonds with terms of just a few weeks or months. They could be as short as 1-3 weeks, or 1-18 months. You'll probably get a higher interest rate on longer term bank bonds. But it's best to compare fixed rate bonds if you need to find a good rate on a shorter term.

The best fixed rate bonds - long term

Fixed rate bonds that last more than five years are thought of as long-term investments. If you're happy to lock your money away for this long, it's best to talk to a financial advisor. They'll be able to chat about all your investment options.

When the term ends on your fixed rate bonds

When your term ends, your bond has 'matured'. About a month before this happens, you'll get a letter or email telling you so.

But banks want you to reinvest your money with them, so they'll usually give you a few options to think about. Your options could be:

  • Reinvest all the money

  • Reinvest all the money and add more

  • Reinvest some of the money, and withdraw some

  • Cash in savings bonds and close the account completely.

Before you decide what to do, you need to compare the best fixed rate bonds and all other savings accounts. This is so that you can get the best fixed rate savings available, and the best access to your money.

You can compare fixed rate bonds using the comparison table at the top of this article.

How to cash in matured fixed rate bonds

Here's what to do when it's time to cash in your matured fixed rate bond.

  1. If you want to close a mature fixed rate bond account, you'll need to fill out a form given to you by your bank.

  2. Wait for your bank to send you a cheque or transfer the money into your account

  3. Decide what you'd like to do next. If you want to reinvest your money, you'll need to compare the best fixed rate bonds and all other savings accounts, or speak to a financial advisor.

How long do fixed rate bonds take to cash?

The best fixed rate bonds providers should be able to cash in your savings for you quickly. It usually takes about eight days to get your money.

If your bank gives you the option to have the money put straight into your account, this is usually the best option. It means that if you see a good fixed rate bond account anywhere else, you'll be able to act fast. But, if you're waiting for a cheque, you might not be able to. Most accounts need an immediate deposit when you open them.

I've found the best bond rates, but will I be taxed?

You do pay tax on fixed rate bonds, but only if you exceed your personal savings allowance. The personal savings allowance lets you earn a set amount of money in interest each tax year before you have to pay tax on these earnings.

For example, in the 2021/22 tax year, the personal savings allowance lets you earn up to 1,000 in interest without paying tax (basic-rate tax payers). You can earn 500 if you're a higher-rate taxpayer. In addition, your total income would need to exceed your personal allowance before you started paying tax. The personal allowance is set at 12,570 for the 2021/22 tax year.

If you earn under 17,500, you can also benefit from the starting rate for savings. This is an additional allowance to add to your personal savings allowance. For the 2021/22 tax year this was set at 5,000 for those who earn 12,570 or less. The allowance then falls by 1 for every 1 you earn above 12,570.

This means that you'll only pay tax on savings interest if:

  • the amount of interest you earn exceeds your starting rate for savings (if you earn under 17,500)

  • AND your personal savings allowance and total income exceeds your personal allowance.


For most savers, the interest you earn therefore won't be taxed. You could save your money in whatever account offered you the best deal without having to worry about paying tax on your earnings. This means that most taxpayers can earn interest from fixed rate bonds in the same way they could with a fixed-rate cash ISA, which is always tax-free.

Pros and cons of investing in fixed rate bonds

The big pro of fixed rate bonds is that they give you peace of mind in terms of interest rates during the term of your bond. And, if you find the best fixed rate bonds, you should get a good rate. Plus, there's minimal risk involved with bank bonds.

On the flip side, you don't have easy access to your money. And, even if you find the best fixed rate bonds, you could be stuck with a deal that isn't very attractive anymore if interest rates rise. Plus, you might have to pay in a lump sum at the start, which you might not want to do.

Are fixed rate bonds covered by FSCS?

Many savings providers are registered with the Financial Services Compensation Scheme (FSCS). This means you can relax knowing your money's protected.

FSCS protects the customers of financial services firms that go bust. If the company you've been dealing with has failed and can't pay claims against it, FSCS steps in to pay compensation.

But be careful how much you save with each provider. The protection limit is 85,000 per person per banking license.

Often many banks operate under a single banking licence, which means that you'll only be covered upto 85,000 in total if you have accounts with different providers under the same license.

Are there alternatives to savings bonds?

Yes, there are alternatives to bank bonds if you want to invest your money. Ideally you should find the best fixed rate savings out there.

You could look at peer to peer savings accounts which can give you a fixed rate of interest for an agreed term. The interest is usually higher than you'd get with even the best bond rates. But the downside is that your money isn't protected under the Financial Services Compensation Scheme and it can be risky.

Other options when you're looking for the best fixed rate savings include fixed rate ISAs and high interest current accounts.

Fixed rate bond FAQs

Q

How much money do I need to open a fixed rate bond?

A

This can vary from 1 up to 50,000. You can use our table filters to find a savings account based on how much you have to open it with.

Q

Can I open a fixed rate bond online

A

Yes. Just like any savings account, you can open a fixed rate bond online, or by visiting a branch of your preferred bank or building society

Q

Can I have more than one fixed rate bond?

A

Yes, but make sure you keep some money accessible in case of an emergency. Read this guide for help choosing the right savings account.

Q

Can I have a fixed rate bond if I have bad credit?

A

Yes, your finances are not checked when you open a savings account. If you need help choosing the right savings account, read this guide.

About our fixed rate bonds comparison

Q

Who do we include in this comparison?

A

We include every personal fixed term bond that offers a fixed interest rate. They are regulated by the Financial Conduct Authority (FCA).

Here is more information about how our website works.

Q

How do we make money from our comparison?

A

We have commercial agreements with some of the companies in this comparison and get paid commission if we help you take out one of their products or services. Find out more here.

You do not pay any extra and the deal you get is not affected.

Last updated: 25 March, 2021