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At a glance:
Fixed rate bonds are a type of savings account that pay a guaranteed rate of interest.
You pay in a lump sum that’s held for a set amount of time, called a term.
The interest rate will stay the same for the term of the account. 

How do fixed rate bonds work?

Fixed rate bonds are accounts that are fixed for a period of time. Bonds with a fixed term can mean a higher rate of interest.
The interest rate will remain the same from when you open the account to the end of the agreed period. This makes fixed rate bonds an option for people who don’t need to access to their money for a while. The interest can either paid monthly or annually. 

How much can I pay into a fixed rate bond?

For most fixed rate bonds, there is a minimum amount of money you will need to pay in to open it.
The top limit you can pay into a bond is usually high, up to a few million (our top limit is £2m). 
The first £120,000 placed into the account will be protected by the FSCS.
How much you need to open a bond or the top amount you can pay in will depend on the provider and account you choose.

Do you pay tax on fixed rate bonds?

How much tax you need to pay will depend on:
How much interest you earn.
How much interest you earn from other accounts.
When you close the account. 
Whether you pay tax on your interest will depend on how much you earn and what your personal savings allowance is.
How much will depend on how much interest you have earned that tax year. The tax year runs from 6 April to 5 April. Find out how it works on the Gov website.

Can you close a fixed rate bond early?

It is highly unlikely that you will be able to close your fixed rate bond account without a penalty.

Some providers may allow you to exit but may charge you interest. You will be able to find the specific terms and conditions of the account from your provider.

In the case of exceptional circumstances, you may be allowed early closure for reasons such as: 

Critical illness
Terminal illness 
Death of an account holder
Court order.

Is a fixed rate bond safe?

Yes, a fixed rate bond is safe. The amount saved in a fixed rate bond cannot go down, unlike an investment. 

 

If your fixed rate bond provider is part of the Financial Services Compensation Scheme (FSCS), then your eligible deposits will be protected up to £120,000. Any deposits over £120,000 will not be protected.


If you are a YBS member, this limit is applied to the total of any deposits you have with the following:

Yorkshire Building Society (deposits linked to an offset mortgage through our subsidiary Accord Mortgages Limited are held with Yorkshire Building Society)
Chelsea Building Society
Norwich & Peterborough Building Society.

How many fixed rate bonds can you have?

There’s no limit on the amount of fixed rate bonds you can have. You can open as many as you wish with different providers. Remember that any money in a fixed rate bond can’t be accessed, often for several years.

Can I add money to a fixed rate bond?

This depends on your provider. When you open a fixed rate bond you can pay in an initial deposit. With YBS, you can keep adding money to a fixed rate bond until a week after it’s taken off sale.
 
Check the terms and conditions of the account when you take it out, some providers may allow you to pay into a fixed rate bond for a set time.
 
Fixed rate bonds may have a higher minimum deposit amount (£1000 for example).

Pros and cons of fixed rate bonds

Of course, as with any kind of savings account, there are pros and cons. Always read all of the terms and conditions of the account. Providers may have different rules for how fixed rate bonds work.

Here are some that may help you to decide on whether a fixed rate bond is right for you:

Benefits

  • Guaranteed returns (as long as you follow the rules of the account).  
  • Can be suited to lump sums.
  • No limit to the number of fixed rate bonds you can hold.

Considerations

  • Not suitable for savings you want to access. 
  • No access to savings in case of an emergency. 
The content on this page is for reference. It is not financial advice. For help with money issues, try MoneyHelper.

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