Are fixed rate bonds a good investment?
Generally speaking, fixed rate bonds are a good investment if you’re looking to earn a competitive fixed rate of interest. Before committing to a fixed rate bond, you should always consider whether you are willing to lock your money up for the fixed term.
How many fixed rate bonds can I have?
You don’t need to hem yourself in with just one fixed rate bond, you can have as many as you like. 6 month, 1 year, 2 year, 3 year or 5 year fixed rate bonds – there are many different terms to choose from. Having more than one account at once can be good investment practice. This staggered approach can be a good way of keeping money constantly maturing and earning interest even when another term has ended.
Can I lose money on my 5 year fixed rate bond?
No. As long as you adhere to the terms and conditions of your 5 year fixed rate bond, you can only earn money, not lose it. The only way to lose money on fixed rate bonds is if you withdraw cash early and get penalised for it. As long as you’re saving with a UK-regulated provider, your deposit will also be protected up to £85,000 per person, per banking group in the event the provider fails.
How do I pay into my 5 year fixed rate bond?
You pay into your 5 year fixed rate bond at the beginning of the term, and that’s it. Withdrawals and additions aren’t usually allowed, so this initial investment is what you’ll be working with. If you’re ready to invest, it’s a simple process. You add the money, you leave it alone for the full term, and it has the chance to grow and earn you even more money.
Can I add more money into my 5 year fixed rate bond?
Many providers won’t let you add money to your 5 year fixed rate bond along the way. The lump sum you deposit when you open your account is the amount that stays in there until your account matures, and there isn’t normally an opportunity to add to this. It’s always best to wait until you have an amount you are happy with before you make your initial investment. However, you could also open up another fixed rate bond further down the line and just choose one with a shorter term than 5 years.
Are there any alternatives to 5 year fixed rate bonds?
If the idea of putting money away for a five year period without being able to access it doesn’t sound right for you, there are other savings options that might be a better fit. You could opt for a fixed rate bond with a lesser term. You could choose a 3 year term, a 2 year term or a 1 year term, meaning that you would be able to withdraw your investment earlier. If you want a savings account that allows more flexibility in terms of withdrawing and adding money throughout the term, you could also opt for a notice account or an easy access savings account.
Are 5 year fixed rate bonds covered by FSCS?
Yes, as long as you open an account with a UK-regulated provider that offers deposit protection. Protecting your money is one of the most important aspects of a 5 year savings plan. Your deposit is be protected by the FSCS for up to £85,000 (not including interest). This amount is per banking group and per person.
How to choose the best fixed rate bonds
How you choose the best fixed rate bond for you entirely depends on your savings goals and how long you can afford to lock away your money. There are many different accounts available, and it’s a good idea to conduct some research before you commit. Important factors to consider include the following:
- How long are you happy to lock away your money for?
- Is the interest rate you’ll earn enough to meet your savings goal?
- Are there any additional payments on top of the interest, such as a bonus?
