The top fixed rate savings bonds

Savings accountsIf you're looking for a place to lock up your savings, make sure you check out these top accounts...

When it comes to savings accounts, many of us prefer the option of an easy access savings account because, that way, we don't have to worry should we need to get our hands on our cash in an emergency.
However, generally speaking, you'll get a better rate of interest if you're prepared to lock away your funds for a year or more in a fixed rate bond. What's more, instead of the variable interest rate you'll receive with an easy access savings account, the interest rate on a bond is fixed for the term of the bond.
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In this article, we've only included bonds that you can open with £5,000 or less.

We've also excluded bonds that come with strings attached - for example, you have to open a current or savings account with the provider to get the bond.

Finally, all of the bonds listed are with providers who participate in the Financial Services Compensation Scheme, which guarantees the first £85,000 of your savings should the provider go bust.

So let's take a look at the best bonds out there at the moment.

One year bonds
If you're interested in investing in a fixed rate bond but don't want to tie up your money for too long, a one year fixed rate bond might be right up your street.

So here are the current top-paying one year fixed rate bonds that you can open with relatively low minimum deposits:

Provider and account

Interest rate (AER)

Minimum deposit

Access

United National Bank 1 Year Fixed Deposit 3.45% £2,000 Online, branch, post
Allied Irish Bank 1 Year Bond 3.40% £1,000 Phone, post

Aldermore 1 Year Fixed Rate Account

3.35%

£1,000

Online, phone, post

Melton Mowbray BS Online Fixed Rate Savings*

3.35%

£1,000

Online

Virgin Money Fixed Rate E-Bond Issue 11**

3.30%

£1

Online

Melton Mowbray BS Jubilee Fixed Rate Savings*** 3.30% £1,000 Branch, post
Post Office 1 Year Online Bond Issue 11 3.27% £500 Online
*Term ends on 31 May 2013

**Term ends on 20 June 2013

***Term ends on 30 June 2013

Two year bonds
If you'd prefer to opt for a two year bond, here are the best low deposit options:

Provider and account

Interest rate (AER)

Minimum deposit

Access

Allied Irish Bank (GB) 2 Year Fixed Rate Bond 3.70% £1,000 Phone, post

AA 2 Year Fixed Rate Savings

3.65%

£1

Post

Post Office 2 Year Online Bond Issue 7

3.63%

£500

Online

Post Office Growth Bond Issue 16 3.61% £500 Online, phone, post
BM Savings 2 Year Fixed Rate 3.60% £1 Post

Saga Internet 2 Year Fixed Rate Savings

3.60%

£1

Online

Tesco Bank 2 Year Fixed Rate Saver 3.60% £2,000 Online, phone, post

So if you're prepared to lock up your money for an extra year, you'll get up to an additional 0.25% in interest.

Of course, this isn't a significant increase in interest, so you may need to weigh up whether you think this extra is worth it versus having your money tied up for longer.

Three year bonds
Now let's now take a look at how three year bonds are shaping up.

Provider and account

Interest rate (AER)

Minimum deposit

Access

Secure Trust Bank Fixed Rate Bond 3 Year Term

3.90%

£1,000

Phone, post

Clydesdale Bank Term Deposits

3.90%

£2,000

Online, phone, post

Yorkshire Bank Term Deposits 3.90% £2,000 Online, phone, post
Halifax 3 Year Fixed Online Saver 3.85% £500 Online
Progressive BS Limited Issue 3 Yr Fixed Rate Bond Issue 18 3.80% £500 Branch, post
Governor Money Saffron BS 3 Year Fixed Rate Savings* 3.75% £100 Online

Marks & Spencer Money 3 Year Fixed Rate Savings

3.75%

£500

Phone, post

krbs 3 Year Fixed Rate Bond Issue 5

3.75%

£1,000

Branch, post

Post Office 3 Year Online Bond Issue 7 3.72% £500 Online
*Term ends on 8 June 2015

Here, the top interest rate is 3.9% - but that's only 0.20% more than you'd get with the Allied Irish Bank.

That said, an interest rate of 3.9% does look significantly better than the 3.45% you'd get with a one year bond. So again, you need to decide whether you're happy to lock up your funds for three years in order to get a higher rate of interest. And remember, you won't be able to get your hands on that cash until the three-year term comes to an end.

Four and five year bonds
There's a risk with four and five year fixed rate bonds. And that's simply because, if interest rates rise over the next couple of years, your money will be locked away for the duration of the term. This means that even if the bond you take out now is competitive, in a few years' time it might not be.

However, if you'd prefer not to worry about switching around your savings after a year or two and you're happy to just let your money sit in your account, earning interest, here is a selection of the best ones:

Provider and account

Interest rate (AER)

Term

Minimum deposit

Access

Secure Trust Bank Fixed Rate Bond 4 Year Term

4.10%

4 years

£1,000

Phone, post

Halifax Fixed Online Saver

4.05%

4 years

£500

Online

BM Savings 4 Year Fixed Rate 4.00% 4 years £1 Post
Governor Money Progressive BS 4 Year Fixed Rate Savings* 4.00% 4 years £100 Online
krbs 4 Year Fixed Rate Bond Issue 3 4.00% 4 years £500 Branch, post
Secure Trust Bank Fixed Rate Bond 5 Year Term 4.45% 5 years £1,000 Phone, post

BM Savings 5 Year Fixed Rate

4.40%

5 years

£1

Post

AA 5 Year Fixed Rate Savings

4.40%

5 years

£1,000

Post

*Term ends on 13 June 2016

Ultimately, deciding how long to tie up your funds is up to you. And as we've mentioned, you need to weigh up whether the rate of interest you'll be earning is worth locking away your funds for several years.

You should also bear in mind that in the majority of cases, you won't be able to make additional deposits once you've opened your fixed rate bond - so again, this may put you off tying up your funds for too long. As always, make sure you read the terms and conditions carefully.

It's also worth mentioning that, at the time of writing this, interest rates were being cut and products were being withdrawn very quickly after launching. So don't hang around too long if you want to put your money away.

Finally, don't forget about tax-free savings! You can also lock away your money in a fixed rate cash ISA (or opt for an easy access cash ISA if you prefer) and you won't have to pay tax on any interest you earn. So make sure you don't miss out.

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