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2 Year Fixed Rate Bonds

What are the benefits of a 2 Year Fixed Rate Bond?

There are several reasons why you may want to choose a 2 Year Fixed Rate Bond (also known as a Fixed Term Deposit). If you have a lump sum that you are prepared to lock away for two years, you could benefit from an interest rate that is typically higher than that of an ISA or Easy Access account with a 2 Year Fixed Rate Bond. Although you won’t have access to your savings until the end of the two years, you’ll benefit from a competitive rate compared to more flexible savings accounts.

See if a 2 Year Fixed Rate Bond is good for you

  • You don’t need to access your savings for two years
  • You want to know how much interest you’ll earn at the end of the two-year term
  • You want to protect your savings from a possible reduction in interest rates over the next 24 months
2 Year Fixed Rate Bonds2 Year Fixed Rate Bonds2 Year Fixed Rate Bonds

2 Year Fixed Rate Bonds

The world we live in is an uncertain one. Decreasing interest rates coupled with a global pandemic may leave you unsure of the best way to earn money from your savings. Fixed rate bonds could hold the answer. They tend to offer higher interest rates than easy access accounts and ISAs and provide some certainty about your savings. A 2 year fixed rate bond would, in fact, provide 24 months of certainty.

What is a 2 year fixed rate bond?

With a 2 year fixed rate savings account, you know how much interest you’ll earn over two years. The interest rate of your fixed rate savings is secured for 24 months, regardless of whether the Bank of England changes the base interest rate. You can open a 2 year fixed rate bond with one lump-sum deposit. At Raisin UK you can make multiple transfers before opening your savings account, following which your savings bond is locked for 24 months.

It’s a simple way of ensuring you get the results you want from your savings in the medium-term. As you’re locked into this savings account for two years, it’s essential to earn as much interest as possible.

If locking your money away for two years doesn’t sound right for you, fixed rate bonds are also available in six month, one year, three year and five year terms. Simply choose the length of time that best suits your savings goals.

Is a 2 year fixed rate bond the same as a 2 year savings bond?

Yes. This type of savings account goes by several different names, all of which mean the same thing. You may hear a fixed rate bond called a fixed term deposit, fixed rate savings, savings bonds or a fixed rate savings accounts, too.

How do 2 year fixed rate bonds work?

With all fixed rate savings accounts, no matter the length of the term, you deposit a lump sum when you open the account. After that, it’s locked in until your bond term ends. For 2 year fixed rate bonds, you likely won’t be able to access this deposit again until the full 24 months have passed and your account matures.

Most 2 year fixed rate bonds have a minimum deposit amount, which is typically between £500 and £1,000. There’s also a maximum deposit amount, which for some savings account service providers can go into the low millions. At Raisin UK, the maximum we’ll allow you to deposit is £85,000 per banking group. This is to ensure that your deposit is protected.

The amount that you can deposit depends on the savings account you’re applying for.

Note that you can’t make any further payments into your fixed rate bond account once it’s open, and it isn’t normally possible to close a fixed rate savings account early.

It is possible to apply for any number of fixed rate savings accounts, but you should consider that your deposit protection limit applies to the bank or banking group your money is held with, rather than the number of savings accounts you have.

Calculating the amount of interest & tax implications

The amount of interest you earn with a 2 year fixed rate account is calculated as a yearly percentage, or annual equivalent rate (AER). How much you can earn depends on:

  1. How long your fixed rate lasts for, i.e. two years
  2. The amount you deposit
  3. The annual equivalent rate (AER)
  4. How interest is earned according to the bank

Basic rate taxpayers can earn interest of up to £1,000 per year without paying tax on that interest. For higher-rate (40%) taxpayers, you can earn interest of up to £500 per year without paying tax.

What are the benefits of a 2 year fixed rate bond?

If you’re looking for a medium-term savings account and are able to deposit a lump-sum that you’re prepared not to see again for 24 months, 2 year fixed rate bonds have the following advantages:

  • The interest rate is fixed for two years
  • You know how much interest you’ll earn
  • You know exactly how long your term is and you can plan accordingly
  • Your money is protected from interest rate changes

Five things to consider in a 2 year fixed savings account

The 2 year term is one of the most important considerations you’ll have for a fixed term savings account, but don’t forget you’ll also need to think about:

  1. The amount you can deposit
  2. Deposit deadlines
  3. The frequency with which interest is earned
  4. How much of your money is protected
  5. Tax implications

Is your money protected in a 2 year fixed rate bond?

The Financial Services Compensation Scheme (FSCS) offers deposit protection on all savings accounts offered by regulated banks in the UK, including 2 year fixed rate bonds. The FSCS will cover deposits of up to £85,000 per person, per banking group, including any interest, in the event that your bank fails.

All of the fixed rate savings accounts from UK banks that you can apply for through our marketplace offer FSCS protection. Savings accounts offered by European banks through our marketplace are covered by the European Deposit Guarantee Scheme (DGS).

How is the interest paid on a 2 year fixed rate bond?

With savings accounts of this type, how you earn interest from a fixed rate bond depends on which 2 year fixed rate bond you open and which bank is offering the account. At Raisin UK, the interest you earn from a fixed rate bond will usually be paid to you upon maturity at the end of your fixed term, regardless of how frequently you earn it. You can view how frequently you’ll earn interest and when it will be paid to you by reading the product summary of any savings account you want to apply for.

What happens at the end of the two year period?

At the end of your 2 years of fixed rate savings, you’ll be presented with the following choices:

  1. Accept a renewal offer to open a new fixed rate bond from the same bank with your original deposit amount and choose to withdraw or deposit the interest you’ve earned
  2. Move your savings to another account
  3. Withdraw your original deposit with any interest you’ve earned and close the account

Discuss your options with your provider when your bond is coming to an end.

Advantages of opening a 2 year fixed rate savings accounts with Raisin UK

Our marketplace provides a choice of 2 year fixed rate savings accounts from UK banks, all of which are free to open. Currently, the highest interest rate for a 2 year fixed rate bond is 1.31% AER.

To find the best 2 year fixed rate savings account for you, use the search tool above and register or log in to apply.

If you’re looking for a savings account with a little more flexibility, check out the notice accounts from our partner banks.

How to open a Raisin UK account

At Raisin UK, you can apply, manage and earn from your savings in one place. You can open a Raisin UK Account and apply for savings accounts in three easy steps. Simply register your details, apply for a savings account and transfer your deposit. Once your application has been approved, you can sit back and earn money from your savings.

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