Everything you need to know about fixed rate bonds
Published: 24 April 2024
Updated on: 22 May 2026
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 is 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 may be 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. The interest rate may be higher the longer the term is.
Can you add money to a fixed rate bond?
While fixed rate bonds are generally designed for lump-sum savers 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. Your fixed rate bond will remain open for deposits up to a specific date.
How many fixed rate bonds can you have?
You can have as many fixed rate bonds as you need, as long as your total savings doesn't exceed the maximum 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 could have various fixed bonds – 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 savers can earn some interest without having to pay tax on it thanks to their Personal Savings Allowance (PSA). Depending on your tax bracket, your PSA could allow you to earn up to £1,000 in interest and have to pay tax on it.
Bear in mind that, if you're a top-rate taxpayer, you don't get a PSA and will pay tax on any interest earned.
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 allow you to 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 £120,000 of your savings per bank, building society or credit union is covered. This includes money that you might have in a fixed rate savings bond.
Fixed rate bonds are savings products and not an investment product that is subject to market fluctuations. However, there are risks, including the fact your money is locked away for the term and the impact of inflation on the real value of your savings.
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 option?
If you have a lump sum of money that you don’t need access to for a period of time, a fixed rate bond could be an option. It also means that you'll know exactly what you'll be getting at the end of the term.
Some things to consider:
- The interest rate is fixed for the term
- It may offer 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 or down as with a 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 longer 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 article is not advice, and you should seek independent financial or legal advice if needed.
