Fixed rate bonds roundup – June 2013
Fixed rate bonds can potentially offer a better return than easy access savings accounts, in return for tying up your capital for a set period.
To help you choose the right savings option for you, see below for our selection of some of the current fixed rate bond deals for June 2013.
We also showcase some alternative ideas for those savers who are happy to tie up capital for three years or more.
Short term fixed rate bonds
If you have £50,000 or more to deposit, Cater Allen offers a two year fixed term plan with a rate of 1.30% gross/AER. For those with lower deposits, United Bank UK are currently offering a 1 year fixed rate bond paying 1.75% Gross/AER with deposits from £2,000. Aldermore’s 1 year fixed rate bond offers 1.85% gross/AER from a minimum deposit of £1,000.
Medium term fixed rate bonds
Vanquis Bank is offering a 3 year fixed rate bond which is currently one of the best three year rates around, at 2.36% Gross/AER with a minimum deposit of only £1,000.
Long term fixed rate bonds
If you are happy to tie up capital for 5 years and have at least £1,000 to deposit, Vanquis Bank offers a 5 year fixed rate bond with a rate of 2.56% gross/AER. You can choose from either monthly or annual interest options.
Alternative options to fixed rate bonds
If you are looking for alternative options to traditional fixed rate bonds, structured deposit plans may worth a closer look. A structured deposit plan is a fixed term deposit with a payout that is linked to the performance of an underlying investment, such as the FTSE 100.
Structured deposits are targeted at people who have a low appetite for risk but are willing to accept a return on the deposit that is dependent on the stock market. While returns are not normally guaranteed in structured deposit plans they offer the potential for competitive rates of return over fixed term bonds. As with a savings account, in the event of the deposit taker going bust, you have recourse to the Financial Services Compensation Scheme (FSCS) which currently covers an individual up to £85,000 per authorised institution.
Some of the plans currently available include:
Three year plans
Investec’s 3 Year Deposit Plan offers a return of 12.5% if the value of the FTSE 100 Index at the end of the term is higher than its starting value, subject to averaging. This plan can be opened from £3,000 and is also available for cash ISAs and cash ISA transfers. Your capital is protected, but returns are not guaranteed and are subject to the performance of the Index.
Six year plans
If you’re able to lock money away for a six year term and are looking for income, Societe Generale is currently offering a Money Builder Deposit Plan with a 6.65%% maximum potential return per year, based on the performance of five blue chip FTSE 100 listed companies. Income will be paid if the value of the five shares is at (or above) 95% of their initial levels. Underlying capital is protected, but income is not guaranteed.
Since returns are not guaranteed, these savings plan alternatives may not be appropriate for every saver. The right plan for you will depend on your financial objectives and attitude to risk. As with any savings product, there is always a trade off for receiving a higher rate of return and with structured deposits, this is made absolutely clear at the outset. The two main downsides are that the deposit taker may go into liquidation (as with any deposit) and that the payout mechanism within the plan does not occur so you only receive your capital back. This has to be balanced and compared to the upside which is inevitably a greater return than could be achieved by putting you money away for the same length of time with a similarly rated credit institution.