A look at some of the top paying savings accounts
When it comes to savings accounts, many of us prefer the option of an easy access account so we don't have to worry should we need to get our hands on our cash in an emergency.
However, you'll generally get a better rate of interest if you're prepared to lock away your money for a year or more in a fixed rate bond. A fixed term bond is just like an ordinary savings account, except you can't touch your money for a set period of time.
Interest rates on shorter-term bonds are slowly increasing and easily beat the top easy access accounts.
And with the Bank of England indicating that interest rates are likely to stay low for the foreseeable future, if you don't like the riskier options then there's definitely an argument for locking your money away in a fixed-rate account, at least for the short term.
All of the bonds listed below 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.
One-year and 18-month bonds
Account | Term | Interest rate (AER) | Minimum deposit | Access |
One year | 2.25% | £1,000 | Online | |
Bank of Baroda Fixed Deposit (one-year) | One year | 2.00% | £500 | Online |
Islamic Bank of Britain 18-Month Fixed Term Deposit* | 18 months | 2.00% | £1,000 | Online, branch, post, phone |
Islamic Bank of Britain 12-Month Fixed Term Deposit* | One year | 1.90% | £1,000 | Online, branch, post, phone |
18 months | 1.90% | £1,000 | Online, branch | |
18 months | 1.90% | £1,000 | Online, branch | |
18 months | 1.90% | £1,000 | Online, branch | |
Norwich & Peterborough BS Fixed Rate Bond | 18 months | 1.90% | £1,000 | Online, branch |
FirstSave Fixed Rate Bond | 18 months | 1.90% | £1,000 | Online |
FirstSave Fixed Rate Bond | One year | 1.85% | £1,000 | Online |
18 months | 1.85% | £1,000 | Online, branch, post, phone | |
Post Office Growth Bond Issue 23 | One year | 1.80% | £500 | Online, branch, post, phone |
Bank of Cyprus 18-Month UK Bond | 18 months | 1.80% | £1,000 | Online, branch, post, phone |
Shawbrook Bank Fixed Rate Bond | 18 months | 1.80% | £5,000 | Online, post |
Paragon Bank One-Year Fixed Rate Bond | One year | 1.75% | £1,000 | Online |
Shawbrook Bank Fixed Rate Bond | One year | 1.75% | £1,000 | Online, post |
One year | 1.75% | £1,000 | Online, post, phone | |
Kent Reliance BS Fixed Rate Bond Issue 27 | One-year | 1.75% | £1,000 | Online, post, branch |
*Anticipated profit rate
^Lower level of FSCS protection
You'll notice some of the accounts offer an anticipated profit rate. This is because they are run according to Sharia law, which forbids the payment of interest.
Two-year bonds
You can get better rates by locking your cash up for longer in a two-year bond.
Account | Interest rate (AER) | Minimum deposit | Access |
2.75% | £1,000 | Online | |
Islamic Bank of Britain Fixed Term Deposit* | 2.30% | £1,000 | Online, branch, post, phone |
State Bank of India Fixed Term Deposit | 2.25% | £10,000 | Online |
Bank of Baroda Fixed Deposit | 2.25% | £500 | Online |
Shawbrook Bank Fixed Rate Bond | 2.25% | £5,000 | Online, post |
Kent Reliance Two-Year Fixed Rate Bond Issue 27 | 2.20% | £1,000 | Online, post, branch |
GE Capital Direct Two Year Bond | 2.20% | £1,000 | Online |
2.15% | £1,000 | Online, post, phone | |
Paragon Bank Two-Year Fixed Rate Bond | 2.10% | £1,000 | Online |
Post Office Growth Bond Issue 23 | 2.05% | £500 | Online, phone, post |
ICICI Bank HiSAVE Fixed Rate Account | 2.05% | £1,000 | Online |
Anticipated profit rate
^Lower level of FSCS protection
Three-year bonds
Now let's now take a look at how the three-year bonds are shaping up.
Account | Interest rate (AER) | Minimum deposit | Account access |
Bank of Baroda Fixed Deposit | 2.50% | £500 | Online |
Shawbrook Bank Three-Year Fixed Rate Bond | 2.50% | £5,000 | Online, post |
State Bank of India Fixed Term Deposit | 2.50% | £10,000 | Online |
ICICI Bank HiSAVE Fixed Rate Account | 2.40% | £1,000 | Online, phone |
Bank of London and the Middle East Premier Deposit Account* | 2.40% | £25,000 | Online |
Chelsea BS Fixed Rate E-Bond | 2.40% | £1,000 | Online, branch |
Barnsley BS Fixed Rate Online Bond | 2.40% | £1,000 | Online, branch |
Yorkshire Building Society Fixed Rate Bond | 2.40% | £1,000 | Online, branch |
Norwich & Peterborough BS Fixed Rate Bond | 2.40% | £1,000 | Online, branch |
2.35% | £1,000 | Online, post, phone | |
Axis Bank Fixed Deposit | 2.35% | £10,000 | Online |
United Trust Bank Three-Year Bond | 2.30% | £500 | Online, post |
Tesco Bank Fixed Rate Saver | 2.30% | £2,000 | Online, phone |
Sainsbury's Bank Fixed Rate Saver | 2.25% | £5,000 | Online |
Investec Three-Year Fixed Term Deposit | 2.25% | £25,000 | Online, post |
Post Office Growth Bond Issue 23 | 2.20% | £500 | Online, phone, post |
2.20% | £1,000 | Online |
*Anticipated profit rate
Four- and five-year bonds
These longer term bonds are more risky. As the term of the account is at least four years, there's a bigger chance that market interest rates could move against you. In other words a five-year account paying 3.10% may look attractive now, but you might be a bit fed up if rates went up and the top instant access accounts were paying 4% in 2016.
With that warning out of the way, here are the top-paying bonds over four and five years.
Account | Term | Interest rate (AER) | Minimum deposit | Account access |
Five years | 4% | £1,000 | Online | |
Secure Trust Bank Fixed Rate Bond Five-Year Term (Series 13) | Five years | 3.01% | £1,000 | Phone, post |
Five years | 3.00% | £1,000 | Online, post, phone | |
Shawbrook Bank Five-Year Fixed Rate Bond | Five years | 3.00% | £5,000 | Online, post |
FirstSave Fixed Rate Bond | Five years | 2.95% | £1,000 | Online |
Bank of Baroda Fixed Deposit | Five years | 2.90% | £500 | Online |
State Bank of India Fixed Rate Deposits | Five years | 2.90% | £10,000 | Online |
Shawbrook Bank Fixed Term Deposit | Four years | 2.85% | £5,000 | Online, post |
Five years | 2.80% | £1,000 | Online | |
Tesco Bank Fixed Rate Saver | Five years | 2.80% | £2,000 | Online, phone |
^Lower level of FSCS protection
Longer-term bonds
If you want even greater returns you could lock your money in for seven years with First Save or SecureTrust Bank, which are both offering a 3.25% return.
While you might end up on an uncompetitive rate in the next few years, at least you'll have had some money coming in over the short term.
Decisions, decisions
Ultimately, deciding how long to tie up your funds is up to you. As we mentioned at the top, 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.
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.
You could earn much more by lending your money via peer-to-peer websites, which cut out the middlemen – the banks and building societies.
And if you don't have too much money to save, several current accounts offer a better rate of interest than even the top-paying fixed rate bonds. For a full round-up of the best rates on a host of cash savings options, take a look at Where to earn most interest on your cash.
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