Fixed-rate bonds and fixed-term savings

A fixed-rate bond is a savings account that pays a guaranteed rate of interest for a set period. You pay in a lump sum when you open it, the rate cannot change during the term, and at the end you get your money back with the interest. MoneyHelper, the government-backed money guidance service, describes them as "interest-paying savings accounts offered by banks and building societies for a fixed amount of time"¹.

The trade at the heart of the product is simple: you give up access to your money, and in return you usually get a higher interest rate than an instant access account pays. MoneyHelper notes that the longer you lock your money in, the higher the rate is likely to be¹. Yorkshire Building Society puts it plainly: "you agree to lock your money away for a set period for a guaranteed interest rate"².

The catch is equally plain. Most fixed-rate bonds take one deposit and then close to further money¹, and early access is either blocked or penalised. Some accounts do not allow access to any of your money until the term ends¹. Before opening one, it is worth knowing exactly what you are signing up to: how long the term runs, whether you can add money, what happens if you need it back, and what your options are at maturity.

What a fixed-rate bond is: a lump sum locked away at a set rate

A fixed-rate bond is a savings account with two fixed features: a fixed term and a fixed interest rate. Teachers Building Society's jargon buster defines it as "a type of savings account which lasts for a set period of time, during which the interest you earn does not change, even if the Bank of England base rate does"⁶. That last point is the defining one. Whatever happens to Bank Rate while your money is locked away, the rate on your bond stays put, in both directions: it will not fall if rates fall, and it will not rise if rates rise.

Family Building Society describes the same product in similar terms: a savings account that holds your money for a set period known as a term⁷. The word "bond" here has nothing to do with investing in company or government debt. A fixed-rate savings bond is a deposit, not an investment: the balance does not go down in value because of market moves, and the interest is agreed at the outset.

The rate is guaranteed because you are giving the provider something it values, which is certainty. It can lend your money out or plan around it knowing you have promised to leave it alone for the term. That is why the rate is usually higher than on easy access accounts, where the provider has to assume you might withdraw at any time¹.

What you give up is flexibility. MoneyHelper warns that fixed-rate bonds "usually won't allow you to add further funds once you've made your initial deposit", that "there can be big penalties for early withdrawal", and that "in some cases you might not be allowed to access any of your money until the end of the term"¹. Which?'s guidance on cash bonds makes the same point: you may have to pay a penalty for making an early withdrawal, "or simply won't be allowed to access any of your capital"⁵. A fixed-rate bond is therefore a home for money you are confident you will not need during the term, not a substitute for an emergency fund.

If you are weighing this kind of account against others, the site's guide to types of savings account sets out the whole range, and easy access vs fixed-rate savings compares the two directly.

Terms on offer: from about six months to five years

Most fixed-rate bonds run for between six months and five years¹. Which?'s guidance on cash bonds says the same: "Most bonds have a fixed term between six months and five years"⁵. Within that range, providers tend to cluster around a handful of standard lengths.

Bath Building Society, for example, offers its Fixed Rate Bonds over "a term of either one year, two years or five years"⁸. Principality's savings guide describes the typical shape the same way: "you'll get a fixed interest rate for a fixed term; like 1, 2, or 5 years"⁹. Which?, writing about emergency savings, describes fixed-term bonds as guaranteeing "the same returns for a set period, usually between one to five years"¹⁰.

Shorter terms exist at the margins. LHV Bank offers a six-month fixed rate bond and a nine-month fixed rate bond alongside its one, two and five-year versions¹¹. At the other end, Family Building Society notes that terms can sometimes run to an even longer range than five years⁷.

A few practical points follow from the length of the term. First, the rate is not the only thing that varies with term length: so does your exposure to being locked into the wrong decision. A five-year bond commits you for longer, so the penalty for needing the money early, or for rates rising sharply after you open it, is bigger. Second, terms are dated. Many bonds are issued as numbered "issues" that close to new customers and are replaced, so the bond you see advertised today may not be available next month. Third, the term starts when the account opens, not when you first see the rate, so check the exact maturity date before you commit.

Adding money: one deposit, then the account is closed to top-ups

The single biggest difference between a fixed-rate bond and most other savings accounts is that you normally cannot add money after opening. MoneyHelper states it directly: fixed-rate bonds "usually won't allow you to add further funds once you've made your initial deposit"¹.

Providers' own terms confirm this. NS&I says of its Guaranteed Income Bonds, Guaranteed Growth Bonds and Green Savings Bonds: "once you've bought a fixed-term Bond, you can't add any more money to it"¹⁴. LHV Bank says the same of its Fixed Rate Bonds, adding that "you can open more bonds if you have additional funds"¹¹. Harrogate Building Society's Fixed Rate Bond, fixed until 31 December 2028, states: "After making your opening deposit, you cannot add more money to this account"¹⁷.

This is where the funding window matters. Most bonds are open to deposits for a limited period, often a few weeks, and once that window closes the issue is withdrawn. If you have money arriving in stages, for example from a house sale or maturing accounts elsewhere, a fixed-rate bond may not fit: you may need the whole lump sum ready when you open it. Some savers handle this by opening several smaller bonds as funds become available, which LHV explicitly allows¹¹, though each bond then has its own term and maturity date to track.

If you want to save monthly amounts rather than a lump sum, a regular savings account is built for that, and a fixed-rate bond is not.

Minimum and maximum deposits

MoneyHelper gives the typical range: "the minimum deposit is usually £100, with a maximum typically of £1,000,000"¹. Individual providers set their own limits within, or outside, that range.

Charter Savings Bank, for example, asks for a minimum deposit of £5,000 across its Fixed Rate Bonds, with a maximum account balance of £1,000,000¹⁸. Harrogate Building Society's bond fixed until 31 December 2028 sits in between: a minimum deposit of £1,000 and a maximum of £500,000¹⁷.

Two things are worth checking before you open. First, the maximum varies by provider: fixed-rate savings bonds typically allow up to £1,000,000¹, though some accounts cap the balance lower, at £500,000¹⁸, and one provider sets a minimum of £5,000 with a maximum account balance of £1,000,000¹⁷. Second, the minimum is usually a genuine floor: because you cannot top up later, you need the full amount available on day one, not just enough to open the account.

Fees and charges: few upfront, penalties where access is allowed

Fixed-rate bonds generally have no upfront fees to open or hold. The cost of the product is not a charge at the start: it is the penalty, or the outright refusal, if you want your money back early.

Where early access is allowed at all, the penalty is usually expressed as a number of days' interest. Which? reports that some cash bonds "will allow you access your money before the term expires but deduct a penalty equal to 90 days' interest"⁵. Others allow no access at all: the same article notes you "may have to pay a penalty for making an early withdrawal, or simply won't be allowed to access any of your capital"⁵.

The harshest published example comes from a comparison Which? made between a fixed-term bond and an ISA, involving a five-year fixed-term deposit account at United Bank UK: "You'll lose 365 days' interest if you choose to close the account before the five-year term is up"¹⁹. A full year's interest is a serious penalty, and on a long bond it can wipe out a large share of the return.

One exception is consistent across the market: death. Bath Building Society states that "A Fixed Rate Bond can be closed in exceptional circumstances, which includes the death of the account owner"⁸. Which?'s guidance on savings and inheritance tax makes the same point about fixed-term accounts generally: "If your money is a fixed-term account that hasn't matured, it can still be closed immediately, with interest paid up to the date of death"²⁰.

Interest: gross payments, timing and tax

Interest on fixed-rate bonds is paid gross, which means the provider does not deduct any tax before paying it to you. MoneyHelper states: "Interest on your savings is paid gross, and you might have to pay tax on it if it's above your Personal Savings Allowance"¹. Providers' terms are identical in effect. West Bromwich Building Society's one year fixed rate bond terms say: "We pay your interest gross. This means tax is not taken off"²¹. Marsden Building Society states interest "will be paid gross. This means all the interest we pay you will be without tax deducted"²², and TSB, SecureTrust Bank and Birmingham Bank all say the same²³.

Gross does not mean tax free. Whether you owe anything depends on the personal savings allowance and your other income, and you are responsible for reporting and paying any tax due²⁵. The guides to how tax on savings interest works and reclaiming tax paid on savings interest cover the mechanics. Scottish taxpayers follow different income tax bands, explained on the tax in Scotland page.

When interest is paid varies. MoneyHelper notes that bonds "usually pay interest annually, but some account will pay this interest quarterly or monthly"¹. Monthly or quarterly options suit people who want the interest as income, which is why NS&I's Guaranteed Income Bonds exist alongside its Guaranteed Growth Bonds, where interest accumulates until maturity¹⁴. How interest compounds, where it is left to build up, is explained in the guide to compound interest.

Some fixed-rate accounts are available inside a cash ISA, where interest is tax free¹. Whether that matters depends on your tax position: the comparison of cash ISA vs ordinary savings sets out who benefits.

Maturity notice: at least 14 days for most, 30 days at NS&I

Providers contact you before your bond matures to explain your options. How much notice they must give varies, and the two patterns in the market are 14 days and 30 days.

Most banks and building societies give at least 14 days. Santander says: "We'll write to you 14 days before it matures to tell you about your options"⁴. Marsden Building Society contacts customers "at least 14 days before the maturity of your Fixed Rate Bond"²⁶, and its Issue 400 bond terms say the same²². Chorley Building Society promises contact "at least 14 days prior to the end of the fixed rate term"²⁷. GB Bank writes "at least 14 calendar days before your maturity date"²⁸. M&S Bank sends a notice of maturity "14 days before your fixed rate bond matures outlining your options"²⁹. Hodge Bank emails customers at least 14 days before the end of the fixed term on both its one-year and five-year bonds³⁰. West Bromwich Building Society writes "within 14 days before your bond matures to tell you your options, including how you can re-invest"²¹.

NS&I gives longer. For its Guaranteed Income Bonds, Guaranteed Growth Bonds and Green Savings Bonds it states: "We'll contact you to let you know your options at least 30 days before your Bond matures"¹⁴, and its maturity guidance says it writes "around a month before your Bonds mature explaining the options available to you"³².

Fourteen days is a short window in which to compare rates and decide, so it pays to know your own maturity date and start looking at options before the letter arrives. The guide to what happens when a fixed-rate savings account matures covers the decision in full.

Reinvesting or rolling over: the rate depends on timing

When a bond matures you generally have three choices: renew for another term of the same length, renew for a different term, or take the money out. NS&I's Guaranteed Growth Bonds guidance lists exactly these options: "automatically renew your Bond for another term of the same length, renew it for a term of a different length, or cash it in"³.

The rate you get on renewal depends on the timing and the type of renewal. NS&I's rule for same-length renewals is favourable: "If you choose to renew your Bond for another term of the same length, you'll receive the interest rate we quote in our letter, or the interest rate on offer on the date your Bond matures, whichever is the higher"³². For a different term, the guarantee disappears: "If you renew for a different term, you'll receive the interest rate on offer on the date your Bond matures, which could be higher or lower than the rate quoted in the Summary Box"³². Green Savings Bonds renewals use the rate quoted in the maturity letter³³.

The practical point is that the rate on a renewal is not the rate you originally agreed, and it is not the rate in the letter unless the provider guarantees it as NS&I does for same-length renewals. Rates on new issues move with the market between the letter arriving and the maturity date. If you do nothing at all, the default varies by provider: some move your money to an instant access maturity account, others roll it into a new fixed term, so the letter is worth reading closely. NS&I's key features document for Guaranteed Growth Bonds confirms that where an interest rate is fixed for a period, "no interest rate changes will apply during that" period¹³, which is also why the reinvestment rate, set at maturity, can differ from the old one.

Who fixed-rate bonds tend to suit, and who they do not

Fixed-rate bonds tend to suit savers with a lump sum they are confident they will not need for the whole term, who value knowing exactly what they will get back, and who want a rate that cannot be cut. Because the rate is fixed, they also protect against falling rates over the term, which is their main advantage over variable-rate accounts when rates are expected to drop. The guide to when a savings provider changes your rate explains what holders of variable accounts face instead.

They tend not to suit savers who might need the money unexpectedly. Which?'s reporting on emergency savings makes the point that money needed for emergencies belongs somewhere accessible, and fixed-term bonds guarantee returns only by removing access¹⁰. They also do not suit anyone saving in monthly instalments, since top-ups are usually barred¹, or anyone who would be stretched by the minimum deposit at a particular provider.

The tax position can matter too. Which? has weighed the choice between a fixed-term bond and an ISA directly¹⁹, and because interest is paid gross¹, a saver with substantial savings may find a cash ISA protects more of their return. The comparison of paying off debt or building savings is also relevant: money locked away at a savings rate is usually worth less than the cost of expensive debt.

Who offers fixed-rate bonds in the UK

Fixed-rate bonds are offered across the whole savings market: high street banks, building societies, savings-only banks and NS&I. There is no single "best" provider, and the right bond depends on term, deposit size, access rules and protection, not on the brand.

High street and familiar names include Santander, which offers fixed-term bonds⁴, and TSB²³. M&S Bank issues fixed rate savings with a summary box setting out its terms²⁹. Building societies are heavy presences in this market: Bath⁸, Yorkshire², Teachers⁶, Family⁷, Principality⁹, Harrogate¹⁷, Charter Savings Bank¹⁸, Marsden²⁶, Chorley²⁷, West Bromwich²¹, Monmouthshire Building Society, which issues numbered one-year and two-year bonds³⁴, and Hodge Bank, which offers one-year and five-year fixed rate bonds³⁰. Savings-focused and smaller banks include SecureTrust Bank²⁴, GB Bank²⁸, Birmingham Bank²⁵ and LHV Bank, whose range runs from six months to five years¹¹.

NS&I, the government's savings arm, offers Guaranteed Income Bonds, Guaranteed Growth Bonds and Green Savings Bonds¹⁴, all with the longer 30-day maturity notice described above. The site's guide to NS&I accounts and bonds explains how NS&I differs, and how building societies work and savings-only and specialist banks explain the other two main categories of provider. Cash savings platforms let you hold bonds from several providers in one place.

What protects savers, and where to get help

Money held in a fixed-rate bond with a UK-authorised bank, building society or credit union is protected by the FSCS up to a limit per person per banking licence. If the provider fails, the FSCS pays compensation, and the guide to FSCS protection for savings explains how the limit works, including for joint accounts and temporary high balances, which can matter when a house sale briefly pushes savings above the limit. Some providers share a licence across brands, so check before spreading a large sum.

Fixed-rate bonds are also a target for scammers, who use the word "bond" and fake provider names to lend credibility. The guide to savings and fake bond scams explains how these work and how to get money back. A basic check before opening any bond is that the provider appears on the FCA Register, and that the account is an FSCS-protected deposit rather than an investment product.

If something goes wrong with a bond, complain to the provider first, then to the Financial Ombudsman Service if you are not satisfied. Free, impartial help is available from MoneyHelper, the government-backed money guidance service, whose page on cash savings bonds covers these products in detail¹. For anything to do with opening an account, the step-by-step guide to how to open a savings account and the page on cooling-off periods set out your rights, including the short window in which you can usually change your mind after opening.