Fixed rate and fixed term savings account

Are you looking for a way to safely grow a lump sum of money? Fixed rate savings accounts (also known as fixed term savings accounts or fixed rate bonds) could be right for you, as they provide a way to benefit from competitive interest rates without risking your savings.

The rundown
  • Interest rates: Fixed rate accounts typically offer better interest rates than standard savings accounts
  • Financial protection: The FSCS protects up to £85,000 of your money per person, per banking group
  • Term of saving: Different terms are available, depending on how long you want to lock away your money for

What is a fixed rate savings account?

A fixed rate savings account allows you to lock your money in at a fixed rate of interest for a specified time, usually one, two, three or five years, as well as six month terms. You might also see these types of accounts referred to as fixed term savings accounts and fixed rate bonds. There’s no difference between them; they’re simply different names for the same type of account.

The length of time (term) that’s best for you depends on your savings goals, but fixed term savings accounts with longer terms typically offer higher interest rates than those with shorter terms. Whichever term you choose, all fixed term savings accounts at Raisin UK offer a risk-free way to grow your savings and secure a competitive rate of interest.

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How do fixed term savings accounts work?

You can open a fixed term savings account with a lump sum deposit that you decide when applying for the account. Once your account is open, you can’t top up your balance or withdraw your money for the fixed term’s duration, so it’s important to choose a deposit amount that works for you. 

Fixed term savings accounts include a minimum and maximum deposit amount, typically from £500 for a minimum deposit and up to £2,000,000 for a maximum deposit. When you apply for a fixed term savings account through our marketplace, you can make as many transfers as you want to meet your initial deposit amount, but it isn’t possible to make any further deposits after your initial deposit. At Raisin UK, your money is always safe, which is why we’ll only allow you to deposit up to the maximum deposit protection amount, which is £85,000 per person, per banking group for FSCS deposit protected accounts.

 

Interest on fixed term savings accounts is advertised as an annual equivalent rate (AER). The amount you’ll earn depends on the following factors:

  1. The length of your fixed term
  2. Your deposit amount
  3. The interest rate (AER)
  4. How the bank calculates interest.

At the end of the term, your account will have ‘matured’. You can then choose to either withdraw your funds, invest your money into another fixed savings account or add to the funds and re-invest the entire amount.

Who are fixed rate savings accounts aimed at?

A fixed rate savings account may be suitable if you want to lock your money away and are confident you won’t need to access it for the duration of the term. These types of accounts are ideal if you have a particular savings goal in mind, for example, to pay for a new car or a wedding. The term you choose will depend on your individual circumstances and when you intend to spend the money. 

Fixed rate savings accounts are not generally recommended if there’s a chance you’ll need to withdraw your cash at short notice, for example, to cover an unexpected expense or a financial emergency. In this case, an easy access savings account may be a more suitable option.

Benefits of fixed rate savings accounts

A high interest fixed savings account might be a good option for you if the following benefits are important to you:

  • You need complete confidence that your savings are safe
  • You don’t want to worry about the interest rate changing
  • You won’t need access to your deposit before your account matures
  • You want to avoid the temptation of spending your deposit

Fixed rate savings accounts typically offer more competitive interest rates than other types of savings accounts.

What fixed rate terms are available?

You can find the best fixed term savings account for you by comparing accounts from a range of UK banks in our marketplace:

In order to make the most of your savings, you might want to consider opening more than one fixed term account. By taking the approach in the chart below, for example, you would have an account coming to the end of its term each year while taking advantage of the higher interest rates that are typical of longer-term bonds.

Approach to multiple Fixed Rate BondsApproach to multiple Fixed Rate BondsApproach to multiple Fixed Rate Bonds

If you need more flexibility from your savings account, an easy access or notice account might be a better option for you.

Will I be taxed on my savings?

Fixed rate savings accounts are not a type of tax-free savings account and aren’t the same as fixed rate ISAs. This means any interest you earn in a fixed rate savings account isn’t automatically protected against tax. However, thanks to the personal savings allowance (PSA), most UK taxpayers can earn interest on savings up to set amounts without paying tax. Basic rate taxpayers can earn up to £1,000 of interest per year, and higher-rate taxpayers up to £500. Additional rate taxpayers do not receive a PSA.

According to HMRC, less than 5% of people pay tax on their savings income. If your interest does exceed the PSA, you will be taxed at your usual rate of income tax. So, if you’re a basic rate taxpayer and you exceed the £1,000 allowance, you’ll be taxed 20% on any interest over that amount. 

Higher rate taxpayers will be taxed 40% on any interest above their £500 PSA, while all interest earned by additional rate taxpayers is taxed at 45%.

Can I lose my money if I save into a fixed rate account?

No, as long as you only open fixed rate savings accounts through regulated banks or building societies offering protection through a deposit guarantee scheme, you won’t lose your money. A fixed rate account is typically a protected savings account and not what you might consider a risky investment. In accordance with UK banking regulations, the Financial Services Compensation Scheme (FSCS) protects deposits of up to £85,000 per person, per banking group. This amount doubles to £170,000 with a joint account.

How to choose the best fixed rate savings account

The best fixed rate savings account for you will depend on your individual savings goals and how much you can afford to lock away. Generally, the best fixed term savings accounts are the ones that offer the most competitive rate of interest for the lowest deposit amount over the period of time that works for you.

When deciding which fixed term savings account to open, ask yourself the following questions:

  • How long do I want to tie my money up for? Most fixed rate savings accounts won’t let you access your cash until the end of the term. If you have a relatively short-term savings goal in mind, a six month or one year fixed rate bond may be suitable. However, if you won’t need to access your money for a while, you might want to opt for a longer term and potentially secure a higher interest rate.
  • Do I have enough money to meet the minimum deposit amount? You need a lump-sum to open a fixed term savings account. The deposit amount varies depending on the account but it’s typically £1,000 or above. In some cases, a larger deposit may mean you receive a better interest rate. 
  • How does the interest rate rate compare to other fixed savings rates? One of the benefits of fixed rate savings accounts is that you can calculate how much interest you’ll earn before you even open the account. It’s also worth checking whether the account offers compound interest, as this can help grow your savings at a faster rate.
  • Does the account management method suit my needs? Can the account be managed easily online? Or would you like the ability to manage it in-branch? This tends to be less of an issue for fixed term savings accounts than it is with easy access savings accounts, but it’s still worth considering.

When it comes to finding the best fixed term savings accounts, it’s important to do your research. You can compare different fixed rate savings accounts online by using our free comparison tables.

Why a fixed term savings account from our marketplace might be right for you

Choose from a range of fixed term savings accounts at raisin.co.uk, all of which feature the following benefits:

  • A risk-free way to grow your savings
  • Earn fixed, competitive rates of interest
  • Higher interest rates on longer-term accounts
  • You’ll know when you can access your savings
  • It’s simple and easy to manage your savings online
  • They’re free to open at Raisin UK
  • If you open a fixed term savings account through a UK regulated bank, the FSCS protects your money up to £85,000 per person, per banking group

How to open a fixed rate savings account

At Raisin UK, the fixed rate savings accounts in our marketplace are free to open. The highest interest rate for a fixed rate savings account on our marketplace is currently 2.10% AER. 

Register for a free Raisin UK Account to apply for savings accounts from our partner banks in three steps:

  1. Log in to your Raisin UK Account
  2. Click to apply (no more application forms) 
  3. Transfer your deposit

As soon as your application is approved, you’ll start earning interest. It’s that simple.

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