Fixed Term and Bond Accounts

Please visit our banking comparison centre to view the latest fixed term and bond accounts

Term and bond accounts are different from your standard savings package, they’re more of an investment on the part of the holder. But in the world of investments, as we all know, things have the potential to go frighteningly wrong. Bond accounts are about as safe an investment as you’re likely to find on the market.

The reason for the safety is down purely to the fact that most term and bond accounts are issued by the National Savings and Investments organization. And who backs the National Savings and Investments? You guessed it! The government do.

By taking out these accounts, you’re effectively lending money to the government. That thought is enough to make some of us gnash our teeth in fake protest but there are several advantages. Let’s look at how the bond accounts actually work first.

Most accounts aren’t exactly active. You don’t have to do much other than make a single payment and sit back as the interest is paid to you, along with an eventual return on the investment sum. The difference is, a bond account will have a specified term – this is where “term account” stems from. Along with that time scale, you will be given a fixed interest rate.

So before you take out a bond account, you’ll have all the details you need to be able to budget for the term of the agreement. If, for example, you agree to commit £1000 on a 3 year time scale with an interest rate of 6%, that will become binding.

You don’t have to worry about share prices fluctuating – it’s a guaranteed investment. We know that it’s reliable because it has the government backing . For all of the bad press, the government is about as reliable as they come when your personal investments are involved.

The only thing to look out for is the interest rates compared to the length of the term. The whole idea of bond accounts is that the interest rates should be higher than the national rates you can get in a savings account. Otherwise, why lock it away? If you agree to a lengthy term account, do make sure that the interest rate is sufficiently high that it won’t be beaten by the rates elsewhere. If you’re dealing with building societies and the like, some will predict an interest rise and make a fast buck by undercutting you with a fixed lower rate.

Term and bond accounts are excellent if you want to make your money work for you with minimal risk attached. They’re guaranteed terms and you can expect to reap better interest than you would in other mainstream saving facilities. But ask yourself whether you can afford to lock your money away in a bonds programme. It’ll cost you a lot to get your hands back on the money before the term is up. Some accounts will be cancelled if you have to dip back in to borrow as much as a penny. Flexibility is hardly its strength.

Please visit our banking comparison centre to view the latest fixed term and bond accounts