As we approach the start of a new year, savers may be considering a new home for their money in order to make the most of their hard-earned cash in 2014. While top fixed rate deals might be thin on the ground at the moment, there are alternatives to traditional fixed rate bonds, such as structured deposit plans, which could be an option for those who would normally have chosen to lock their cash away in a fixed rate bond. See below for our selection of some of the latest fixed rate bonds and alternative savings plans on the market in December 2013.*
Short term fixed rate bonds
For those looking for a short term fixed rate bond, Principality offers two options – a 9 month fixed rate bond and an 18 month fixed rate bond – paying 0.75% AER/gross and 1% AER/gross respectively. Both accounts require a minimum deposit of £5,000, and no additional deposits or withdrawals are permitted during the term of the plans.
Cater Allen offers a 1.30% AER/gross rate on its 1 year fixed rate bond to customers with an initial deposit of £50,000 or over, guaranteed by Santander. Withdrawals are not permitted during the fixed term.
For those with a lower initial deposit, Aldermore currently provides a one year fixed rate bond offering 1.75% gross/AER requiring a minimum deposit of £1,000.
Medium term fixed rate bonds
For those with at least £1,000 to deposit, Aldermore’s 3 year fixed rate bond pays 2.45% AER/gross, while Vanquis offers a 3 year fixed rate paying 2.61% AER/gross. Aldermore currently pays 2.70% AER/gross on its 4 year fixed rate savings account, with deposits starting from £1,000, while Vanquis offers a rate of 2.91% AER/gross over 4 years, on deposits from £1,000 to £250,000.
Longer term fixed rate bonds
If you are happy to tie up your capital for longer, the 5 year fixed rate bond from Vanquis Bank offers a rate of 3.16% AER/gross and allows you to save between £1,000 and £250,000, with the option of receiving your interest annually or monthly. Aldermore offers a 5 year fixed rate savings plan paying 3.15% AER/gross and requiring the same £1,000 minimum balance.
Click here to see a selection of our current fixed rate bonds >>
AER – Stands for the Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and compounded once each year. (As every advertisement for a savings product which quotes an interest rate will contain an AER, you will be able to compare more easily what return you can expect from your savings over time)
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 deposits are targeted at people who have a low appetite for risk in relation to their capital, but are willing to accept a return that is dependent on the stock market. While returns are not normally guaranteed in structured deposit plans, they can offer the potential for competitive rates of return when compared with the rates that are currently on offer from fixed term bonds. However the returns from fixed rate bonds are guaranteed.
Investec currently offers a 3 Year Deposit Plan which could offer a maximum potential return of 13% gross after 3 years. The objective of the Plan is to provide a full repayment of capital at the end of the three year term, plus a defined return of 13% provided that the Final Index Level (subject to averaging) is higher than the Initial Index Level. If, at maturity, the Final Index Level is equal to or lower than the Initial Index Level, you will not receive a return but your original capital will be repaid.
For those looking for a longer term plan, the Legal & General 6 Year Growth Deposit Bond offers 200% x any FTSE 100 growth, capped at 35%. It has a low minimum deposit of £500 and is capital protected. However, returns are not guaranteed and you may only receive a return of your original capital.
These are structured deposit plans and 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 returns from structured deposits are not guaranteed. The past performance of the FTSE 100 Index and any companies listed on the FTSE 100 Index is not a guide to future performance.
No news, feature or comment should be seen as a personal recommendation to invest. If you are at all unsure of the suitability of this type of investment, both in respect of its objectives and its risk profile, you should seek independent financial advice.
* Data accurate as of 16/12/2013.
