|1 Year Fixed Rate Savings Account||1.85%||1 Year||£1000|
High Interest Bonds
High interest bonds offer a guaranteed, regular return on your savings. Which bond offers the current best rate? Compare our bond rates as they are perfect if you don't need instant or regular access to your money and want a better rate of interest.
|Scottish Widows Fixed Term Deposit||2.00%||3 Years||£10,000|
|Scottish Friendly Bond||Variable||10 Years||£25 per month|
Understanding High Interest Bonds
The general idea behind high interest bonds is a straightforward one; by agreeing to leave your money untouched in the bank for a set period of time (normally between one and five years) you can benefit from higher interest rates than you'd get from a standard savings account.
As well as offering higher rates of interest, these bonds differ from regular savings accounts in that they offer a fixed rate of interest. As the rate is guaranteed to remain the same for the duration of the bond, you can calculate exactly how much of a return you'll be getting on your investment before you enter into an agreement. This takes out some of the guess-work and uncertainty that comes with many other forms of investment.
Whilst the rates on offer can be tempting, it's important to remember that, when choosing to invest in a fixed rate savings product, there's more to consider than just the rate of interest. In most cases you won't be able to access your money until the end of the 'term' (the length of time the bond lasts for). You need to be confident that you can do without the money for the duration of the period as, if you find you do need it, there will normally be a penalty for making a withdrawal. For instance, you could be docked a number of days worth of interest or, in some case you may have to close the account altogether.
Several years is a long time to wait to get your hands on your money, so if, you can't be sure how your finances will look further down the line, it could be wise to look for a shorter term account.
As well as looking at the long term, you also need to consider how much you are going to be able to part with straight away, as many accounts have a set minimum opening balance. This can be a nominal sum, such as £1, a fairly low sum such as £500, or a much steeper sum. In some cases, an institution may ask that you pay in several thousands to open the account.
Whatever the minimum deposit, you should look to pay in the full amount that you'd like to save upon opening the account. This is because, generally, there is either a limited time in which you can actually pay into the account, or additional deposits are not allowed at all. This means that you effectively need to have a lump sum handy which you are ready to invest. If you are looking to build on your investment gradually, a fixed interest account will not be your best option.
Finally, you need to think about what interest rates are likely to do whilst your money is stowed away. If you commit to an account whilst rates are at a historic low, though it may seem like a great deal at the time, a few years down the line you may find that even a run-of-the-mill instant access savings account offers a better return on your money. By the same token, what seems merely attractive now could seem absolutely incredible if rates fall.
Picking the right account is all about finding a provider offering a good balance between what they are offering you compared to what they are demanding from you.
For example, one bank my offer a marginally higher interest rate, but ask you for a higher deposit and a longer term. You have to ask if these trade-offs work for you.
Comparing High Interest Bonds
Given that opening a fixed rate account is a real commitment, shopping around for a product that is suited to you is vital. Our comparison table above shows you details of some of the best accounts available and allows you to compare them at a glance. Here's a guide to using it;
- Provider: In this column you'll see the name of the bank offering the account. Often these are familiar names such as high street banks, but sometimes less well known companies from the world of finance are featured.
- Account: In this column you'll see the name of that the provider gives their high interest bond. This name will normally include how long the term is i.e. '2 Year Fixed Bond'. However, if it doesn't, you can find out how long the term of the account is under the column titled 'term'.
- Interest (AER): Here you'll see the interest rate on offer. (AER stands for annual equivalent rate. Giving you the rate in this way allows you to easily compare accounts whether they earn their interest daily, weekly, monthly or yearly.)
- Term: This column will give you the length of the term.
- Minimum Deposit: In this column you can see exactly how much you are required to pay in in order to initially open the account.
- More Info: If you are interested in an account, simply click the 'more info' button to see the full details.
At the top of the page you'll see UK Net Guide's recommended account. We compare the market regularly to bring you the accounts that offer the best value to customers, but it is worth understanding the criteria behind our recommendations before you make a decision.
In short, we select our recommended product based on how attractive the rate is compared with the minimum deposit they require- the rate generally being the biggest draw of a product and the minimum deposit often being one of the main drawbacks with high interest bonds. If you are happy paying a considerable minimum deposit, be sure to look down the table as their maybe better rates available to you.
Remember that personal investments up to the value of £85,000 are covered by the FSA, meaning your money is protected should the institution you are banking with run into trouble for any reason. If you are investing more than this it can be prudent to split up your investments to ensure they are covered.
If you need help understanding your options and coming up with an investment strategy, talk to a qualified financial adviser.