A Guide To Fixed-Rate Savings

Savers are often looking for the best ways to boost their savings, and fixed-rate savings accounts are becoming increasingly popular. These types of savings accounts, also known as fixed-rate bonds, are ideal if you want to invest a lump sum and enjoy guaranteed returns and predictable growth over a specific period.

But what is a fixed-rate bond? Are they safe? And how long should you fix your savings for?

We answer all your questions about fixed-rate savings accounts in this comprehensive guide, sharing information to help you make choices for your financial goals.

What is a fixed-rate bond?

A fixed-rate bond is a type of savings account offered by banks or building societies where the interest rate remains the same for a set period.

Think of fixed-rate bonds as a secure haven for your savings, where you deposit a lump sum and let it accumulate interest over an agreed timeframe.

As the interest rate is locked in for the duration of your bond, you can calculate how much you’ll earn when you set up your account. Interest is usually paid at the end of the term but can be paid monthly, quarterly or annually – it depends on your provider.

You can’t withdraw funds from a fixed-rate savings account until the end of the term, so make sure you only deposit savings you won’t need until the timeframe ends.

Because you agree to lock your funds away for a specific amount of time, interest rates are often higher than for instant access accounts.

Are fixed-rate bonds safe?

The Financial Services Compensation Scheme (FSCS) covers all our fixed-rate bonds, meaning they’re completely safe.

Deposits up to £85,000 (£170,000 for joint accounts) are protected, so you can rest assured that if anything happens to your plan, your deposit and interest remain secure.

You can also avoid market volatility risks when you sign up for a fixed-rate bond. Because the interest rate you get at the start stays the same for the whole term, you’ll know exactly how much interest you’ll earn and won’t be affected by fluctuations.

What are the different types of fixed-rate bonds?

There are different types of fixed-rate bonds you can sign up for. Each lasts for a different length of time and offers a slightly different interest rate for savers.

Bonds that run for longer periods generally have higher interest rates. Remember, the rate you sign up for won’t change during the term (it’s fixed).

Can I have multiple fixed-rate bonds?

Nothing is stopping you from opening multiple fixed-rate bonds at the same time and with the Saga Savings Platform, you can split your money over different terms to suit you

It might suit you to split your funds into long-term and short-term accounts. This approach combines the benefits of long-term growth with the flexibility of access to a portion of your savings.

How long should I fix my savings for?

How long you fix your savings is totally up to you. It depends on a few factors, including:

Accessing funds. Consider how long you can do without the money you’re depositing, as you won’t be able to access it until the end of the term (known as the account’s maturity).
Financial goals. Define your short, mid, and long-term financial objectives and choose a fixed-term bond that aligns with your savings goals.
Economic climate. Check interest rate forecasts and assess if rates are expected to rise or fall. If rates are predicted to rise in a few months, it might be a good idea to deposit into a short-term fixed-rate bond and reassess the market at the end of the period.

Taking all these points into consideration before applying for a fixed-rate savings account is key.

Once your fixed-term comes to an end, what happens next is your call. You can withdraw your money (including the interest you’ve earned) or choose a new fixed-rate bond and move your funds there.