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5 Year Fixed Rate Bonds

What are the benefits of a 5 Year Fixed Rate Bond?

There are several reasons why you may want to choose a 5 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 five years, you could benefit from an interest rate that is typically higher than that of an ISA or Easy Access account with a 5 Year Fixed Rate Bond. Although you won’t have access to your savings until the end of the five years, you’ll benefit from a competitive rate compared to more flexible savings accounts.

See if a 5 Year Fixed Rate Bond is good for you

  • You don’t need to access your savings for five years
  • You want to know how much interest you’ll earn at the end of the five-year term
  • You want to protect your savings from a possible reduction in interest rates over the next 60 months
5 Year Fixed Rate Bonds5 Year Fixed Rate Bonds5 Year Fixed Rate Bonds

5 Year Fixed Rate Bonds

A 5 year fixed rate bond can provide long-term certainty in a climate of change. With the Bank of England’s interest rate set at just 0.1% (March 2020), a 5 year fixed savings account could be a way of maximising your savings.

What is a 5 year fixed rate bond?

With a 5 year fixed rate savings account, the rate of interest is guaranteed for five years, regardless of whether the Bank of England base rate increases or decreases. You deposit one lump sum when you open the account, and then your money is locked away to earn interest for the next five years.

Although you’ll see 5 year fixed rate bonds referred to as 5 year fixed term deposits, 5 year fixed rate savings, savings bonds or fixed rate savings accounts, these are different names for the same thing.

The benefit of this type of account is that if you have a lump sum available that you don’t need access to over the long-term, you’ll know exactly how much interest you’ll earn from your savings. As you’re protected from interest rate changes, you can plan accordingly.

A 5 year fixed rate bond is one of the simplest ways of ensuring that you safely earn money from your savings.

As you’re locking your savings in for five years, it’s important to find a fixed rate savings account that earns as much interest as possible and suits any other requirements you may have. As an idea of how much interest 5 year fixed rate bonds typically earn, the best interest rate from a partner bank on our marketplace right now is 0.95% AER.

How do 5 year fixed rate bonds work?

When you open a 5 year fixed rate bond, you deposit a lump sum. This sum will be locked in for the full five year term, meaning that you won’t be able to access these savings until the five-year term elapses.

Most fixed rate savings accounts require a minimum and maximum deposit, normally somewhere between £500 and £2,000,000, although this will depend on the savings account provider. Because deposit protection is only available from the FSCS up to £85,000, savings accounts at Raisin UK have a maximum deposit amount of £85,000, so you can rest assured that your savings are safe.

Two things to bear in mind are that you can’t normally close your account or withdraw your money early, nor is it possible to make further deposits after your initial lump sum.

Are other fixed rate bonds available?

Yes, at Raisin UK you can apply for six month, one year, two year and three year fixed rate savings accounts and more. They all work in roughly the same way, and you should check the details of each savings account to see the differences. The only notable difference is the length of the term, i.e. how long your savings are locked away for.

How much interest will I earn?

At Raisin UK, interest is always calculated as an annual equivalent rate (AER), but some savings account providers calculate interest as a yearly percentage. The actual amount of interest you earn depends on the length of your term, i.e. five years, the amount you deposit when you open your account and how the bank that is offering your fixed rate bond pays out interest.

Usually, interest is paid by the bank annually or upon maturity. Before you apply for an account, it can be beneficial to check that the way interest is paid suits your needs.

Will I be taxed on my savings?

Basic rate taxpayers can earn tax-free interest of up to £1,000 per year. Higher-rate (40%) taxpayers can earn tax-free interest of up to £500 per year.

Is your money protected in a 5 year fixed rate savings account?

The Financial Services Compensation Scheme (FSCS) provides deposit protection of up to £85,000 per person, per banking group. This means that in the event that the banking group fails, your deposit and any interest that you have earned up to £85,000 can be returned to you.

When you apply for a 5 year fixed rate bond through our marketplace, you can be confident that your savings are safe and secure. All savings accounts offered by UK banks at include FSCS deposit protection.

What happens at the end of the fixed term?

At the end of your five year term, you can choose to renew your fixed rate bond by accepting a savings account offer from the same bank, choosing whether to do so with your original deposit and any interest you’ve earned, or just your deposit. You can also choose to switch your savings to a new account or withdraw your original deposit along with any interest earned.

The 5 year fixed rate savings accounts from Raisin

The Raisin UK savings marketplace features a choice of 5 year fixed rate savings from different UK banks. These accounts are all free to open, and they can all be managed and accessed from one place. Currently, the best interest rate available for a 5 year fixed rate bond at is 0.95% AER.

To find the best 5 year fixed rate savings account that suits your needs, use our product overview above, and register or log in to apply for an account.

If you’re not sure which savings account is most suitable or if you’d like something a little more flexible, find out more about our notice accounts or get in touch with our UK-based Customer Service Team.

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