Best savings bonds


If you’ve got cash available which you can afford to leave untouched for a while, a savings bond could be worth a look.

Unlike easy access accounts, a savings bond comes with a set term, and pays a fixed rate of interest during that term – so, you might invest your cash for three years in a bond which pays 2.50%, for example.

You can choose how long you want to tie up your cash for as bonds tend to come with one, two, three, four or five-year terms. And, as you may expect, as a general rule, the longer you commit your money for, the higher rate of interest you’ll earn.

Savings bonds usually require you to invest a one-off lump sum, and most accounts won’t allow you to top them up once they are up and running. As a result, you’ll usually need at least £100 to open this kind of account, although many require a £1,000 initial investment or, in a few cases, as much as £5,000 or £10,000.

Who do savings bonds suit?

A savings bond might be right for you if you’ve got a defined savings goal in mind. Perhaps you’re saving towards a wedding in a couple of years’ time, or you want to get on the property ladder in the next few years?

As you know exactly how much interest you’re going to be earning with a savings bond, you know what you’ll end up with when the account matures. Some savings bonds allow you to have the interest you earn paid monthly rather than annually – which can be useful if you’re looking to top up your existing income.

...the longer you commit your money for, the higher rate of interest you’ll earn

Fixed-rate risk

Knowing your returns will remain the same over time may be useful for budgeting purposes, but it can also be something of a double-edged sword.

After all, the last thing you want is for interest rates to rise, while you have locked yourself into an account that is no longer competitive.

Let’s say you’ve gone for a four-year bond which pays 2.75%. It looks like a good deal now, but what if interest rates start climbing and, after a couple of years you could be earning 3.50% in an easy access account? The longer you tie up your savings, the greater this risk becomes.

On the flipside though, if rates remain low for some time to come, you could end up earning much better returns than if you had plumped for an easy access savings account.

Withdrawal penalties

The other potential downside of savings bonds is that you cannot usually get your hands on your cash until the end of the account term. A few savings bonds allow a limited number of penalty-free withdrawals, but most charge a penalty – in the form of loss of interest – if you want to take out any money before the bond matures. That means you could be in for a very long wait if you’ve put your money into a five-year bond.

Where can I find savings bonds?

Savings bonds are offered by wide range of providers including high street banks, building societies and even supermarkets. If you decide a fixed rate savings bond, is right for you, remember rates vary so be sure to shop around for the best deal.

Fixed rate bonds - Maximise your savings by fixing - featured accounts - ordered by term then rate (AER)

  1. Great for
    Interest paid monthly or on maturity
    The rate of interest is fixed for the entire period of the deposit
    An instant access savings account will automatically be opened when you apply
    But be aware that
    Withdrawals, early closures or additional deposits cannot be withdrawn before maturity
  2. Great for
    2.20% AER fixed for 24 months from receipt of your deposit
    Interest calculated daily and paid either monthly or annually
    But be aware that
    Withdrawals are not permitted within the fixed term
    Only one deposit permitted
  3. Rate Boost

    First three years at 2.80%, last two years at 3.30% AER

    Great for
    Long term savers
    Benefit from a rate of 3.30% for the last two years of the term
    But be aware that
    A minimum deposit of £25,000 is required to open this account
    Interest is paid into an Investec easy access account - this is opened automatically as part of your application
    Withdrawals are not permitted within the fixed term

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