Best fixed rate bonds for over 50s
To find the best fixed rate bonds for over 50s, consider how much and how long you want to invest. Also, to get the best deal, compare fixed rate bonds across the whole market as these high interest savings accounts are designed for all ages, not just the over 50s.
Although the rates are usually higher, fixed rate savings accounts are one of the more restrictive types of savings account. Therefore you need to be comfortable with the terms and conditions.
The following information explains the benefit of this type of high interest savings account, what to look out for and how to choose the best fixed rate bond for you.
What are fixed rate bonds?
Fixed rate bonds are savings accounts that pay a fixed amount of interest over a set period, known as the bond term. There is usually a minimum and maximum amount you can invest, ranging from £500 to £2 million, which cannot be added to or accessed during the bond term.
So once you open your account, you will either be required to pay the full amount you want to invest immediately, or be given a short window to do so. Once the money is invested, it cannot be touched.
Fixed term savings are typically available over 1 to 7 years. The longer your money is tied up the higher the interest rate. However as your money can’t be accessed until the end of the term, you should only invest what you can afford for as long as you can afford it.
Having said that, some fixed rate savings accounts will let you access your money but you will be charged a hefty penalty. Therefore if you think there’s a chance you may need the money, a fixed rate bond may not be the best savings account for you.
What are the best fixed term interest rates?
Interest rates on fixed term savings are as you would expect fixed. As the term of the account is also fixed, you know exactly how much interest your money will earn.
The interest accrued can be paid a number of ways depending on the type of fixed term savings account you choose:
- At the end of the term
To find the best fixed term interest rates keep an eye out for accounts that pay compound interest as you benefit from interest being paid on the interest already received.
Some fixed term savings accounts pay interest monthly into a separate account. Whilst you won’t benefit from compound interest with this option, it could be beneficial if you prefer to receive a regular income from your savings.
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How many fixed rate bonds can I have?
You can have more than one fixed term savings account but remember each will have its own restrictions. If you are thinking about having multiple fixed rate bonds, make sure you can afford it and you that you won’t need to access your funds.
If there is a chance you may need to dip into some of your savings, it may be worth looking at other types of savings account rather than multiple fixed term savings accounts.
Also be aware of your personal savings allowance to ensure you are not liable for tax. If this is the case, a fixed rate cash ISA may be more suitable.
Are 1 year fixed rate bonds better than 5 year bonds?
1 year fixed rate bonds are worth considering if you want a high interest savings account that doesn’t tie your money up for long. However although it’s possible to find 1 year fixed rate bonds with better rates than 5 year deals, usually longer term bonds offer the best rates.
Therefore if you want high interest over a shorter period, a 1 year fixed rate bond maybe an option. Whereas if you don’t need to access your funds, longer term bonds may offer a better return on your investment.
What are the pros and cons of fixed rate savings accounts?
The pros and cons of fixed rate savings will help you decide if this is the right type of savings account for you:
- Higher interest rates compared to other types of savings account
- Fixed rates mean interest is guaranteed
- You know exactly how much your investment will earn
- Some fixed term savings accounts offer compound interest, so you earn interest on the interest accrued
- No access to money during the term means you won’t be tempted to dip into your savings
- You can only pay into the account at the start of the term
- You can not access your money until your bond term ends
- If you can access your money early, you will be heavily penalised
- You won’t benefit if interest rates increase
Are fixed rate bonds covered by the FSCS?
Fixed rate bonds offered by UK Financial Conduct Authority authorised banks and building societies are covered by the Financial Services Compensation Scheme. The FSCS protects up to £85,000 of your savings or £170,000 for joint accounts per institution.
Just remember that some organisations may form part of the same institution. For example HBOS owns the Bank of Scotland, Birmingham Midshires, Halifax, Intelligent Finance and Saga. Therefore the £85,000 FSCS threshold would apply to these institutions collectively rather than individually.
What is the best fixed rate savings account for me?
Fixed rate bonds could be the best option if you’re looking to invest a lump sum that you won’t need access to. However if you want to add to your savings, or believe you may need it for emergencies, then a fixed rate bond may not be the best choice.
Therefore you should consider how much you want to invest over what period before deciding the best fixed rate savings account for you.
How to compare fixed rate bonds
To compare fixed rate bonds you need to decide how long you are happy locking your money away. Then, once you’ve decided whether you prefer a 1 year fixed rate bond or something over a longer period, you should compare the whole market, not just savings accounts for over 50s.
Online comparison services such as Which?, MoneySavingExpert, Moneyfacts and Savings Champion are a great place to start but don’t forget to read the terms and conditions.