How do fixed rate bonds work?
Fixed rate bonds are available with different terms. In general, the longer the term, the higher the interest rate. Most fixed rate bonds require a minimum deposit to open the account. Unlike many other savings accounts, you are usually only allowed to pay in once, which is when you open the account.
Providers of fixed rate bonds may give you the option to have earned interest paid out either monthly or yearly.
What does ‘term’ mean?
With fixed rate bonds, the ‘term’ is the amount of time you choose to lock your money away for, e.g. 1 year.
What does ‘maturity’ mean?
When your fixed rate bond term ends, your money ‘matures’ and you get access to it. This is known as maturity.
Can the interest rate change?
No, the interest rate is fixed until your account matures.
What happens when the fixed term ends?
It depends on what provider your fixed rate bond is with.
Here at the Co-operative Bank, on maturity of your fixed rate bond (The Co-operative Bank Fixed Term Deposit), we transfer your money into an instant access account. This allows you to withdraw your money if you wish to, or reinvest into a different account, either with us or a different provider.
Around 4 weeks before your fixed rate bond reaches maturity, we will contact you to let you know of your options. These include re-investing in another fixed rate bond, withdrawing your money or both.
Other providers may tie your money up in another fixed rate bond on maturity if you don’t let them know that you want to withdraw, so it is important that you read the maturity information before opening the bond, not just at maturity.
Are there fixed rate bonds for children?
Yes, some providers offer children’s fixed rate bonds, and some adult fixed rate bonds do not have a minimum age requirement.
A fixed rate bond can also be opened as a ‘re: account’. This is a fixed rate bond that has been applied for on someone else’s behalf, and is usually for people who don’t have their own current accounts yet.
As children have the same income tax allowance as adults, the interest earned in a child’s name is also liable to tax. You can find more information about interest on savings for children on the gov.uk website.
Here at the Co-operative Bank, you can open a fixed rate bond if you are a UK resident aged 16 or over and have a minimum of £1,000 to deposit.
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