Best fixed rate bonds – latest deals Go compare with our comparison table

Best fixed rate bonds – latest deals

22 February 2013 / by Isabel Buxton

With interest rates at record lows, locking cash away in a fixed-rate bond is no longer a guarantee of getting a good return. With the Government’s Funding for Lending Scheme giving banks cheap money, there’s little incentive for providers to encourage savers by offering high fixed rates. For savers looking to tie up money in a fixed rate bond, for however many years, the current deals on offer to savers have dropped by more than 30% compared to twelve months ago, according to our research. However, there are alternatives to traditional fixed rate bonds – in particular, structured deposit plans, which are worth a closer look.

Latest Fixed Rate Bond Deals

We highlight a selection of some of the current leading fixed rate bond deals available now, as well as offering some alternative ideas for those who are happy to lock away cash for three years or more.

1. Short term fixed rate bonds
If you don’t want to tie up cash for much more than a year, Principality Building Society are currently offering an 18 month fixed rate bond paying interest at 1.99% AER gross/AER.

2. Medium term fixed rate bonds
Natwest are currently offering a 2 year fixed rate bond with a starting deposit of £1,000. This plan offers 2% gross/AER until the start date of 25th March 2013, after which savers can expect 2.25% gross/AER.

3. Long term fixed rate bonds
Vanquis Bank are currently offering rates of 2.61% and 3.01% Gross/AER for 3 year and 5 year fixed rates bonds respectively. You can choose from monthly or yearly interest and the minimum initial deposit is £1,000.

Alternative options to fixed rate bonds

A structured deposit plan is a fixed term investment with a payout that is linked to the performance of an underlying asset e.g. FTSE 100. Structured deposit plans may therefore be a suitable option for those who might otherwise have chosen fixed rate bonds. They suit people who are willing to accept a low level of stock market exposure in exchange for the potential to make better returns than those currently available via fixed rate plans.

When considering your options and how best to spread your savings, the current economic outlook suggests that these alternatives deserve closer attention and with the ability to utilise your cash ISA allowance and make cash ISA transfers, you have plenty of choice available.
 

Use the tables below to compare a selection of fixed rate bond deals that are currently available.

No news, feature article or comment should be seen as a personal recommendation to invest. If you are in any doubt as to the suitability of a particular investment you should seek independent financial advice. Tax treatment is dependent on your individual circumstances and may change.

These are structured deposit plans that are capital protected. There is a risk that the company backing the plan or any company associated with the plan may be unable to repay your initial investment and any returns stated. In this event you may be entitled to compensation from the Financial Services Compensation Scheme (FSCS), depending on your individual circumstances. In addition, you may not get back the full amount of your initial investment if the plan is not held for the full term. The past performance of the FTSE 100 Index and any of it shares is not a guide to its future performance.
 

Savings Selection
ProviderPlan NameDeposit TakerISA OptionTermMaximum Potential ReturnMore Info
Retirement Deposit PlanInvestec Bank plcyes6 years

3.75%

per year, plus 22.5% at end of term

More Info >
  • 3.75% annual payments from capital
  • 77.5% remainder of initial deposit paid at end of term
  • Potential 22.5% growth return at end of term, if the Index is higher than 90% of Initial Value
  • Capital protected
  • Low minimum - £3,000
  • Short/medium alternative to fixed rates
  • Available for Cash ISA and  ISA Transfers 
  • Covered by the FSCS (Financial Services Compensation Scheme)
  • Limited offer - deadlines apply. May close early if oversubscribed
  • Only available for new ISA investments or ISA transfers, not direct investments
  • Plan designed to be held for full term
  • Arrangement fee applies
  • Returns not guaranteed. You may only receive a return of your original capital
6 Year Defensive Deposit PlanInvestec Bank plcyes6 years

24%

at end of term

More Info >
  • 24% fixed return if the Index is higher than 95% of its Initial Level
  • Capital protected
  • Low minimum - £3,000
  • Medium/longer term alternative to fixed rates
  • Available for Cash ISA,  ISA Transfers and non-ISA
  • Covered by the FSCS (Financial Services Compensation Scheme)
  • Limited offer - deadlines apply. May close early if oversubscribed
  • Plan designed to be held for full term
  • Arrangement fee applies
  • Returns not guaranteed. You may only receive a return of your original capital

Important Information: Structured deposits offer you the potential to earn higher returns than you would with a regular savings account. Your returns are based on the performance of an index or commodity. If the investment does not perform well you may receive no income or capital growth, but you can be confident that your capital will be repaid. You have no access to your deposit during the term of the account, typically 3 to 6 years but your original capital will be repaid in full at the end of the term. In the event that the deposit taker is unable to repay your initial investment and any returns stated you may be entitled to compensation from the Financial Services Compensation Scheme (FSCS) depending on your individual circumstances.