08:06 17 July 2013
Fixed rate bonds, which are usually offered by most banks and building societies, are savings accounts that pay a set rate of interest on the maturity date. The interest rate is generally higher when compared to easy-access accounts.
These are highly recommended for people who are looking to invest lump sum of money and those who do not need to access the funds for at least six months.
If you withdraw the money within the fixed term, you are more likely to pay a penalty.
In order to qualify for some of the most competitive accounts, you will need to meet the minimum deposit, which is usually £10,000 to £25,000.
When investing, ensure that the bank or building society that offers fixed rate bond is regulated by the Financial Services authority. This will give you peace of mind knowing that the Financial Services compensation scheme will cover deposits of up to a certain amount.
You should consider fixed rate bonds if you have some cash that you do not need to access for several months or years. It’s also a good option if you want to stay away from more risky investments such as the stock market or foreign exchange.