Should I choose a fixed-rate savings bond or an easy-access account?

Full answer

The choice is a trade-off between certainty and flexibility, and it affects anyone with cash savings rather than investments. A fixed-rate bond locks both your money and your interest rate for a fixed term (commonly 1 to 5 years). The advantage is rate certainty: if you fix and rates later fall, you keep your higher rate. The disadvantage is access -- most bonds bar withdrawals entirely or charge a stiff interest penalty, so the money is committed. An easy-access account lets you pay in and withdraw freely, but the provider can cut the variable rate at any time, and these accounts usually pay less than a comparable fixed bond. A sensible structure is to keep an emergency buffer in easy-access and put money you are confident you won't touch into a fixed bond. Use a savings calculator or compound-interest calculator to compare the actual interest each option would earn over your time horizon. Worked illustration of the mechanism: GBP 20,000 at 4.5% fixed for one year earns GBP 900 of interest, whereas the same sum in an easy-access account at, say, a lower variable rate earns less, but you can withdraw whenever you like. The right answer depends on whether the extra interest outweighs the loss of access. Tax matters for 2026/27. Interest is taxed under the Personal Savings Allowance: GBP 1,000 tax-free for basic-rate taxpayers, GBP 500 for higher-rate, and GBP 0 for additional-rate. Crucially, a multi-year fixed bond that pays all interest at maturity can land a large lump of interest in a single tax year, potentially using up your allowance at once -- look for bonds paying interest annually if that is a concern. To shelter interest entirely, a Cash ISA uses your GBP 20,000 ISA allowance and the interest is tax-free.

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