Bonds or Term Accounts

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Bonds or Term Accounts

These accounts are high interest savings accounts which offer the most competitive interest rates and are great for people who can afford to lock their money away for a fixed amount of time.

They require money to be tied up for a specific period of time – usually between 1-5 years and often have a minimum balance requirement. Adding to your initial deposit is not normally permitted once a bond has been opened.

Most Providers do not allow any type of withdrawal before the maturity date – any withdrawals that are allowed will normally have penalty incurred.

The interest rate on most accounts is fixed from opening the account until the maturity date, protecting you from losing out if the base rate drops, but this also means that you won’t benefit from any rate increases during the agreed amount of time either.

Pros of bonds or term accounts

• Interest rates are usually the most competitive on the market.
• Recommended for people who have spare money and can afford to lock their money away for a fixed length of time.

Cons of bonds or term accounts

• The interest rates paid on bonds are fixed for the length of the bonds, or in some cases predetermined by the bank or building society - therefore any considerable rise in the Bank of England base rate interest within that period will not be reflected by the change in the rate offered on the accounts.
• Most Providers do not permit further deposits once the initial deposit has been made.
• Access to money before the maturity date (short notice) is not usually permitted.