Best 1-Year Fixed Rate Bonds

Read on to learn more about fixed rate bonds.

Updated: January 3, 2024
Matt Crabtree

Written By

Matt Crabtree

 

It's always a good idea to save for your future. Consider a one-year fixed rate bond if you've got a lot of money for the future. You can keep the money away for a rainy day and earn interest. So, you can make more money by saving!

In this article, you'll learn about fixed rate bonds, how they work, and how you can make more of your savings, and we've picked the best six for you to choose from.

ServiceScoreRegister
1. Oxbury Personal 1-Year Bond Account★★★★★Click Here
2. Smart Save 1-Year Fixed Rate Saver★★★★★Click Here
3. OakNorth Bank 12-Month Fixed Term Savings Account★★★★★Click Here
4. Close Brothers Fixed Rate Bonds★★★★★Click Here
5. Atom Bank Fixed Saver★★★★Click Here
6. Cynergy Bank 1-Year Fixed Rate Bond★★★★Click Here

What is a Fixed Rate Bond?

A fixed rate bond is a fixed rate savings account that allows you to earn a fixed interest rate on your savings over a set period. Most fixed rate bonds only allow you to access the money at the end of the agreed period.

You'll know how much you'll earn when you open the account.

Different periods, rates, and offers depend on each fixed rate bond provider. Looking at what's on offer before committing to a fixed rate bond. Before applying for a fixed rate bond, consider the following factors:

  • Deposit amount: bonds have minimum deposit limits and maximum amounts you can save.
  • Interest rates: picking a fixed rate bond with a higher interest rate will help you save the most money.
  • Charges: check any agreements and small print to see any penalty charges in case you need to access the money early.
  • Savings management: check for easy access to the savings accounts. You'll want a bond you can access and control online or through an app.
  • Financial Services Compensation Scheme (FSCS) protected: before applying for any fixed rate bonds, you should check that the account provider is FSCS covered.

The amount you'll earn from your fixed rate bond account will depend on your initial deposit and the fixed interest rate. So, if you put down an initial deposit of £5,000 and have a fixed interest rate of 3% by the end of your one-year fixed term, you'll have £5,150. The higher the interest rates, the more you'll make from your initial deposit.

The Benefits and Drawbacks of One-Year Fixed Rate Bonds

Before we share our top picks for the best one-year fixed rate bonds, you must know the pros and cons to help inform your decision.

The Benefits of a Fixed Rate Bond

✔️ One of the safest types of investment is its low risk and protection by the Financial Services Compensation Scheme.

✔️ Guaranteed return at the end of the fixed term, as inflation doesn't affect interest rates.

✔️ Good option if you're looking to save a large lump sum.

✔️ Offer higher interest rates than other savings products.

The Drawbacks of a Fixed Rate Bond

❌️ If your savings surpass the personal savings allowance, you may have to pay tax on the interest.

❌️ If you need to withdraw money early, you may face penalty charges.

Fixed Rate Bonds vs Easy Access Accounts

As you know, fixed rate bonds are a type of savings account.

However, it’s distinctive from other savings accounts, such as easy-access accounts. Although they're all used for saving, they function differently.

With an easy-access account, you can withdraw and deposit money whenever possible. Whereas with a fixed rate bond, you can only make an initial deposit and withdraw at the end of the fixed term.

Interest rates are different between the two savings accounts, as with an easy access account, interest rates are variable and can change whenever. However, with fixed rate savings bonds, you're given a fixed Annual Equivalent Rate (AER) at the beginning of the agreement, and it won't change for the duration of the fixed period.

There's more flexibility with other savings accounts as you can open one with as little as £1, and you're not limited on how much you need to keep in the account. Whereas, with fixed rate savings bonds, you have to deposit a minimum amount, and you can't go below that amount- this isn't a bad factor as it's ideal for a guaranteed return on your savings.

The 6 Best 1-Year Fixed Rate Bonds

1. Oxbury Personal 1-Year Bond Account

The Oxbury Personal 1-Year Bond Account, allows you to save and earn interest on lump sums between £1,000 – £500,000. If you're worried about the temptation of taking your savings out early, this account prevents you from making withdrawals until the end of the term.

Key Features:

  • Interest rate: 4.54% AER.
  • Deposit amount: £1,000 to £500,000.
  • Fund access: end of the agreed fixed term.

Advantages

✔️ You can make large deposits of up to £500,000.

✔️ No fees or charges.

✔️ Competitive interest rates.

Disadvantages

❌️ You'll no longer earn interest if the balance falls below £1,000. However, you'll have 14 days to fund the account.

❌️ You can only apply online and need a smartphone to use the IOS or Android App to access the Oxbury Online Banking platform.

2. Smart Save 1-Year Fixed Rate Saver

The Smart Save 1-Year Fixed Rate Saver is ideal for saving large sums of money, with the minimum amount being £10,000. It's suitable if you're saving up to buy a house or looking to earn interest on more significant savings.

Key Features:

  • Interest rate: 4.55% AER.
  • Deposit amount: £10,000 to £85,000.
  • Fund access: end of the agreed fixed term.

Advantages

✔️ Competitive interest rates.

✔️ Save ‌significant amounts starting from £10,000.

✔️ Interest accrues daily and is paid annually.

Disadvantages

❌️ No joint account option.

❌️ High minimum deposit.

3. OakNorth Bank 12-Month Fixed Term Savings Account

Start saving from as little as £1 or as much as £500,000 with OakNorth Bank's one-year Fixed Term Savings Account. Like most fixed rate bond accounts, you can't access the money until the fixed period ends. However, you can choose a fixed period of six to 60 months.

Key Features:

  • Interest rate: 4.57% AER.
  • Deposit amount: £1 to £500,000.
  • Fund access: end of the agreed fixed term.

Advantages

✔️ If you decide to reinvest after your fixed term, you can get a loyalty bonus rate of up to 0.01%.

✔️ You can open a joint fixed rate savings account.

✔️ No hidden fees.

Disadvantages

❌️ Everything is accessed via the OakNorth Bank app. So, you can only apply through the app and control your finances on the app too.

4. Close Brothers Fixed Rate Bonds

If you want to gain interest on a larger lump sum of up to £2 million, then the Closer Brothers' 1-Year Fixed Rate Bond may be the right option. Once you've opened the account, you can add funds for 10 calendar days.

Key Features:

  • Interest rate: 4.54% AER.
  • Deposit amount: £10,000 to £2 million.
  • Fund access: end of the agreed fixed term.

Advantages

✔️ Competitive interest rate.

✔️ You can earn interest on large sums of up to £2 million.

✔️ Manage your account either online or by phone call.

Disadvantages

❌️ High minimum deposit of £10,000.

5. Atom Bank Fixed Saver

Control your savings with Atom Bank's Fixed Saver account with their in-app service, so you can save using your smartphone. With competitive fixed interest rates, you can make interest on savings up to £100,000.

Key Features:

  • Interest rate: 4.55% AER.
  • Deposit amount: £1,000 to £50,000.
  • Fund access: end of the agreed fixed term.

Advantages

✔️ You can open an account in as little as 10 minutes.

✔️ You can choose from one to five years for your fixed term.

✔️ Competitive interest rate.

Disadvantages

❌️ Limited savings, as you can only save up to a maximum of £100,000.

❌️ You can only open and manage your account via their banking app.

6. Cynergy Bank 1-Year Fixed Rate Bond

If you're not looking for a personal fixed rate bond, consider Cynergy Bank's 1-Year Fixed Rate Bond. Their fixed rate bonds are ideal for SMEs and start-ups in the UK. This account is accessible as you can apply online, on the phone, and by post.

Key features:

  • Interest rate: 4.47% AER.
  • Deposit amount: £10,000 to £1 million.
  • Fund access: within the first 14 days and then not until the end of the agreed fixed term.

Advantages

✔️ You may be eligible for loyalty rates if you reinvest after your fixed period.

✔️ You have multiple application options: online, over the phone, and via post.

✔️ Can deposit up to £1 million.

Disadvantages

❌️ High minimum deposit of £10,000.

How to Apply for Fixed Rate Bonds Savings Accounts

Now that you know about our top fixed rate bonds, you may be curious about how to get the ball rolling on your application. We've compiled the steps to help ease you into the process.

Follow these steps to help you open a fixed rate bond account:

  1. Find the right fixed rate bond, choose the right one, apply for the best way that suits you, and read all terms and conditions before you sign an agreement.
  2. Deposit your money: once your bond account is open with your chosen financial institution, deposit your lump sum.
  3. Money is locked away: you won't be able to access it during the 12 months it's locked away, but you can trust that it will build interest.
  4. Interest earned: once your fixed rate year has ended, you can take out the original money you deposited plus the interest earned.
  5. Spend or reinvest: if you don't need the money, you can reinvest it in a new fixed rate bond and earn even more money from your savings. Most financial institutions offer bonus loyalty rates for reinvesting with them.

It's that simple! Like other financial investment products, there are requirements you'll need to meet and documents you'll have to show to start saving with year fixed rate bonds. We've compiled a list of requirements and documents you'll need to help you prepare before you fill out any applications.

Requirements:

  • You need to be over 18 years old.
  • You need a permanent UK address you've had for over three years.
  • Proof of ID like a Passport or driver's licence.
  • Proof of address.

Alternatives to Fixed Rate Bonds

It's okay if you don't feel like fixed rate bonds are the right saving option.

There are other financial tools you can use to help you save money. We've compiled a list of alternatives that we think may help you:

  • Lifetime ISA: with this ISA, you can save up to £4,000 a year to buy your first house or retirement. You'll receive an extra 25% government bonus up to £1,000 annually. However, you can only apply for a Lifetime ISA aged 18 to 40.
  • Cash ISA: an individual savings account that allows you to save tax-free up to £20,000 annually. However, interest rates can be low on these ISAs, and you may earn more from your savings elsewhere.
  • Easy access savings account: as we mentioned earlier, if you want a place to put your extra money aside and have access to any time, this may be the best option. You may not earn as much interest as with fixed rate bonds, but you'll always have access to your money.
  • Notice savings accounts: this savings account is similar to a fixed rate bond. You lock away your money and earn interest. However, you can withdraw your money, but it has to be within the notice period your provider offers.
  • High-interest savings accounts: the title is self-explanatory. You earn high interest on your savings. However, these accounts come with certain conditions, such as needing a high minimum deposit, usually starting from £10,000 upwards.

Final Thoughts on Fixed Rate Bonds

Fixed rate bonds are ideal for saving money and guaranteeing interest. If you're tired of having easy access to your savings and need some willpower, consider locking your money away in a fixed rate bond savings account.

Now that you know how fixed rate bonds work and we've shared our top recommendations for the best ones, you're ready to start making the most out of your savings without any risks. Remember, once you've deposited your money, it's locked in until the end of the fixed term.

Explore all your financial options and tools with Compare Banks. On our website, you can search through all banks, building societies, financial institutions, and banks across the UK and compare them to find the most suited.

Related Guides:

Frequently Asked Questions

Do I Pay Tax on My Fixed Rate Bonds?

How Much Can You Earn with Fixed Rate Bonds?

Are Fixed Rate Savings Accounts Safe?

Are 1-Year Fixed Rate Bonds a Good Idea?

Related Articles

Pepperstone Review
Generally speaking, whether you've been trading various financial instruments for...
Best Free Trading Platforms
Top free trading platforms in the UK offer multiple benefits. If you're interested...
Best Demo Trading Accounts
If you are interested in trading various financial instruments but are unsure how...
Best Investment Platforms
If you're new to investing, you’ll want to choose an investment platform that’s...

Mentioned Banks

Last updated:  About Atom Bank Atom Bank is a digital-only financial company and ‘challenger bank’ established in Durham in 2014. Challenger banks...
Learn More
About Close Brothers Close Brothers was founded in 1878 by 25-year-old William Brooks Close, alongside his two brothers. Now well into its second century, Close Brothers is a leading...
Learn More
About Oaknorth Bank Oaknorth is a UK bank founded in 2015 by Joel Perlman and Rishi Khosia, founders of Copal Amba. They were inspired to start the company after coming up against...
Learn More