What is a Fixed-Rate Bond and how does it work?

A Fixed-Rate Bond is a savings account where you agree to lock your money away for a set period of time. In return, you receive a guaranteed, fixed rate of interest for the full term. This gives you certainty about how much you’ll earn.

How do Fixed-Rate Bonds work?

When you open a Fixed‑Rate Bond, you’re committing your money for an agreed term, usually between one and five years. You normally cannot withdraw your money during this fixed term. During the term, the account earns a fixed amount of interest. Interest is usually paid once a year or at the end of the term, depending on the specific bond you choose.

Can you have more than one Fixed-Rate bond?

Yes, you can. Opening more than one bond can help you spread your savings across different terms or interest rates. Just remember that each bond has its own rules, including how long your money is locked away.

Do you have to pay tax on Fixed-Rate bonds?

Interest earned on Fixed-Rate Bonds may be subject to income tax. How much you pay depends on your individual tax bracket and your wider tax situation. If you’re unsure, you may want to speak to a tax professional.

What is the main advantage of Fixed-Rate bonds?

The biggest advantage is certainty. You know exactly what interest rate you’ll receive and when you’ll receive it. This makes Fixed-Rate Bonds useful if you prefer predictable returns and want to plan ahead.

What are the disadvantages?

• Your money is locked away. You usually can’t access your savings until the end of the term. If early access is allowed, it may involve a penalty or loss of interest.
• Potentially lower returns than riskier investments. Because Fixed-Rate Bonds are low risk, the interest rate may be lower than you could earn from other products.

If you need more flexibility, a notice account or easy‑access account might suit you better.

Can you lose money on a Fixed-Rate bond?

Fixed-Rate bonds are generally low‑risk, but no financial product is completely risk‑free. If the provider were to fail and wasn’t covered by a financial protection scheme, like the FSCS, you could lose some or all of your savings. Always check that your savings are protected before you invest.

Can you open a Fixed-Rate bond jointly?

Yes, you can open a Fixed-Rate Bond jointly with another person, such as a partner or family member. Joint accounts can be useful if you’re saving together but consider any tax implications before applying.

Important things to remember

Before you open a Fixed-Rate Bond with us, make sure you’re happy with the interest rate, the term length, the rules around withdrawing money early, your ability to lock away your savings for the full term and any tax implications. If you’re unsure whether a Fixed-Rate Bond is right for you, you may want to seek independent financial advice. 

If you want to find out more information, take a look at our Fixed-Rate products here.