If you are looking for a fixed rate savings deal in June 2014, 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 for a fixed term. See below for our selection of some of the best fixed rate bonds and alternative savings plans on the market in June 2014.*
Short term fixed rate bonds
One year fixed rate bonds are more plentiful than in recent months, with the Post Office 1 Year Online Bond leading our selection with an interest rate of 1.61% AER/gross. The deposit for this account is set at £500 minimum and both annual and monthly interest options are available. The account is online-only and no further withdrawals or deposits are allowed after the beginning of the term. A similar rate of 1.60% AER is available from Aldermore with the 1 Year Fixed Rate Bond, with a minimum opening balance of £1,000 and online-only account operation.
Those with a lower deposit, who still want to take advantage of a short term fixed rate bond, may want to take a look at the Virgin Money 1 Year Fixed Rate e-Bond, which pays 1.55% AER/gross on balances from £1 – £1,000,000. With the option of monthly or annual interest, this could be a fixed rate to consider for many savers.
Medium term fixed rate bonds
The Virgin Money 2 and 3 year fixed rate bonds offer interest rates of 2.10% and 2.25% AER/gross respectively. Both accounts can be opened with just £1 and are available for lump sum deposits of up to £1,000,000.
For those looking for a medium term fixed rate, the Bank of Cyprus 3 year fixed term deposit plan offers 2.50% AER/gross. This account requires a minimum opening balance £1,000 or over, up to a maximum balance of £1,000,000. Interest is paid annually and the account is available on a single or joint basis.
If you are prepared to put your cash away for 4 years, Vanquis Bank offers a 2.66% AER/gross interest rate that is fixed for four years on balances between £1,000 and £250,000. This account allows you to choose whether you want to receive your interest on a monthly or annual basis.
Longer term fixed rate bonds
If you are happy to tie up your capital for longer, you can choose from our selection of five year fixed rates. The Aldermore 5 Year Fixed Rate Bond offers a rate of 3.10% AER/gross on balances of £1,000 or more. The account can be managed online, by post or over the phone.
For people with lower deposits, the Virgin Money 5 Year Fixed rate bond offers 2.75% AER/gross on balances from just £1. With the option of annual or monthly interest payment, this account could be an option to consider for people who want to lock up their cash for longer.
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 could offer an alternative to traditional fixed rate bonds because it offers the potential for a payout that is linked to the performance of an underlying asset such as the 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.
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.
Tax treatment of ISAs depends on individual circumstances and may be subject to change in the future.
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 25/06/2014.
