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Published: 24 April 2024

When it comes to finding an account to help to grow your savings, a good option could be a fixed rate bond. The concept of a fixed rate bond is fairly simple – put aside your money for a set amount of time and, in return, you'll get a fixed interest rate of interest on your savings. This could make them a good home for a lump-sum investment that you can sit back and watch grow.

Here's a quick run through of a few things you need to know about fixed rate bonds.

What's a fixed rate bond?

The clue is very much in the name with a fixed rate savings bond. It's an interest-paying savings account that holds your money for a set amount of time and pays a fixed rate of interest. That interest rate is usually higher than what you might get with easy or instant access savings accounts. The important thing to remember is you won't be able to access your money while it's held in the bond.

How do fixed rate bonds work?

Fixed bonds work on the basis that you're comfortable putting money away that you can't access for a set amount of time whilst it earns a fixed rate of interest. It's worth considering:

How long do fixed rate bonds last?

Fixed rate bonds can last between 1 and 5 years. Generally, the longer the term of the bond is, the higher the interest rate will be.

Can you add money to a fixed rate bond?

While fixed rate bonds are generally designed for lump-sum investors who have a set amount of money to put in, you can add further funds to your bond as long as it's still open for funding. Your fixed rate bond will remain open for deposits up to a specific date which you’ll find out should you apply for an account.

How many fixed rate bonds can you have?

You can have as many fixed rate bonds as you want, as long as your total investment doesn't exceed the maximum operating balance specified by your bank or building society (for us, that's £1,000,000, or £2,000,000 for joint accounts). You'll also find that many account types are limited to one per customer.

That means you can diversify your fixed bond investments if you want – for example, putting away some money for 1 year while committing different funds to a 2 year or 3 year fixed rate bond.

Do you pay tax on fixed rate bonds?

Interest earned on fixed rate savings bonds is taxable, but many investors will have some level of tax-free savings protection thanks to their Personal Savings Allowance (PSA). Depending on your tax bracket, your PSA can afford you up to £1,000 of tax-free interest earned annually.

Bear in mind that, if you're a top-rate (45%) taxpayer, you aren't afforded a PSA and will pay tax on any interest earned in a fixed rate bond.

How is interest paid on a fixed rate bond?

That will depend on the type of savings bond that you choose but most fixed rate bonds pay interest annually. Some longer term fixed rate income bonds pay interest on a monthly basis.

Can you close a fixed rate bond early?

Alongside not having any access to your money while it's held in the bond, you also won't be able to end the bond early. To access your money, you'll need to wait for the bond to mature when it comes to the end of the agreed term.

Are fixed rate bonds safe?

Thanks to the Financial Services Compensation Scheme (FSCS), up to £85,000 of your savings per institution is protected, which includes money that you might have in a fixed rate savings bond.

Fixed rate bonds also don't carry any risk as an investment in relation to fluctuating market rates. Your bond carries a fixed interest rate that's guaranteed for the entire duration of the bond, and your money isn't invested anywhere that carries risk like, for example, a stocks and shares ISA.

Assuming that you honour the bond term to which you agreed, you'll always get back all of your money plus the interest that you've earned.

Who can open a fixed rate bond?

If you want to open a fixed rate bond with us, you'll need:

  • To be 18 or over
  • At least £100 to meet the minimum operating balance of your chosen account

You can open an account with us:

Are fixed rate bonds a good investment?

A fixed rate bond is best thought of as a steady investment account because you know exactly what you'll be getting back and there are no market related elements that might affect your money for better or worse.

Some things that mean a fixed rate bond could be right for you:

  • A fixed interest rate
  • Generally a higher rate of interest than other savings accounts

Some things that you need to bear in mind:

  • No access to your money until the bond matures
  • The interest rate on the account can't go up like it can with variable savings accounts

What's the best fixed rate bond for me?

Take a look at our full range of fixed rate bond products today. We've got short and long term options to suit your savings goals. You can also compare our full savings range online to see if there's another account out there for you.

If you'd like more information about our different accounts, ways to save, and more, take a look at our Home and Money section where you'll find loads of useful articles for savers, home buyers and more.


This guide is intended as a summary only and does not constitute legal or financial advice given by Leeds Building Society. No reliance should be placed on this guide. We recommend that you seek independent legal advice and/or financial advice if you have any questions.

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