Best Fixed Rate Bonds Up to 1 Year

What is a fixed rate bond of up to one year?

‘Up to one-year bonds’ is a broad name given to any fixed savings account with a term of less than 12 months. For instance, you’ll find three-month bonds, six-month bonds and nine-month bonds all feature on our chart above.

These accounts pay a fixed rate of interest for the specified number of months, which means the interest rate won’t change and you’ll receive a guaranteed return on your money.

However, you won’t typically be able to access your savings during this period.

Bear in mind that these fixed rate bonds are a type of savings account; they are not an investment bond.

Who are fixed term savings accounts of less than one year for?

Short-term fixed rate bonds are suitable for any savers who want to earn a fixed rate of interest on a lump sum of money they won’t need to access for a number of months.

Some savers may not be able to afford to lock their money away for one year or more, so these short-term bonds with terms of less than one year can be appealing options as, unlike easy access accounts, the rate is guaranteed to stay the same.

They can be ideal if you have a lump sum in savings that you’re putting towards a short-term savings goal, such as a holiday. By depositing it in a short-term bond, you can earn a competitive rate of interest for several months until you need to use your money.

Furthermore, because your money is locked into the account, it ensures you won’t be tempted to dip into your funds for any reason other than the purpose it’s intended for.

What term duration is best?

The best term will ultimately depend on your savings goal and personal circumstances; remember, as most fixed bonds prohibit early access, you must be comfortable locking away your money for the duration of whichever term you choose.

Typically, bonds of less than a year may be preferred by those with a short-term savings goal, such as an upcoming holiday or big-ticket purchase. However, you can secure guaranteed returns for longer with a one-year fixed bond, two-year fixed bond, three-year fixed bond or even a five-year fixed bond.

What happens at the end of a fixed rate bond?

Once a fixed bond reaches the end of its term (or ‘matures’), a provider will either return your money plus interest to the account from which you originally transferred, or move the funds to another savings account.

In some cases, this may be an easy access account; while this allows you to withdraw your funds without restrictions, be wary of letting your savings sit in a low-paying account for too long. In contrast, other providers may automatically reinvest your savings into another fixed bond if you don’t withdraw your cash within a given timeframe.

While some banks and building societies will contact you regarding your options prior to a bond maturing, it’s always best to check the small print for further details on what happens at the end of the term before opening an account.

Fixed bonds vs notice savings accounts

Fixed bonds and notice accounts are both potentially higher-paying alternatives to easy access savings accounts.

When it comes to notice accounts, the best rates are typically offered by products requiring a longer notice period, and this can sometimes mean waiting up to six months or more before gaining access to your cash.

Therefore, you may wonder whether you should opt for a short-term fixed rate bond instead; we explain the key differences between these types of savings accounts below:

Is a minimum deposit required for a fixed rate savings bond of less than one year?

As with most savings accounts, fixed rate bonds with terms of less than one year typically require a minimum deposit. Some providers may ask for a sizeable opening deposit of £10,000 or more, while other accounts may only require a deposit of £1,000 or potentially even less.

You can see the minimum deposit requirements of each account by clicking “view further details” on the chart above.

Bear in mind that you may only be able to make one deposit into your account when you first open it. However, other providers may allow you to add to your savings for a limited number of days after opening.

What would the estimated balance be after six months on a £1,000 deposit?

If you deposit £1,000 into a six-month bond paying 4.00% AER, you could earn approximately £20 in interest. This would take your total balance to £1,020.

What are the alternatives to a short-term fixed rate bond?

If you earn enough interest on your savings to be at risk of exceeding your Personal Savings Allowance (PSA), you could consider a short-term fixed ISA as a tax-free alternative to an up to one-year fixed bond.

Like fixed bonds, fixed ISAs come with a variety of different terms; one-year fixed ISAs could also suit those with a short-term savings goal. You can compare the best rates for different types of accounts using our dedicated savings charts.