Glossary · UK

What is Fixed-Rate Savings Bond?

A savings account that pays a guaranteed fixed interest rate for a set term, usually with no access to your money until maturity.

Full Definition

A fixed-rate savings bond is a deposit account where you lock away a lump sum for a fixed term -- commonly one, two, three or five years -- in return for a guaranteed interest rate. Because the rate is fixed, you know exactly what you will earn, which is useful when interest rates are expected to fall, though you miss out if rates rise. Most bonds do not allow withdrawals before maturity, or impose a penalty, so they suit money you will not need in the short term. They are offered by UK banks and building societies and are typically protected up to GBP 85,000 per institution under the Financial Services Compensation Scheme. Interest may be taxable, but the Personal Savings Allowance lets basic-rate taxpayers earn GBP 1,000 of savings interest tax free (GBP 500 for higher-rate, nil for additional-rate). For tax-free saving, compare against a cash ISA, which has a GBP 20,000 annual allowance for 2026/27.