What's the difference between fixed rate bonds and fixed rate savings accounts?

The best fixed rate bond will depend on your circumstances and savings goals. For example, bonds with longer terms might offer higher interest rates. But you’ll need to think carefully about how long you can afford to lock your cash away.

As a result, the best fixed rate bond may be the one that balances competitive returns with a manageable term.

The term is simply the length of time you lock your money away for. Typical terms on fixed rate bonds last up to five years. It’s also the period when a fixed, guaranteed interest rate applies.

Maturity refers to the end of your fixed term. It’s the point when you can access your savings or move them to a different account.

Fixed rate bonds are savings accounts offered by banks and building societies. They could help you to save a lump sum, paying a guaranteed interest rate over an agreed period.

In the investment world, bonds are issued by private companies or a financial adviser. When buying these bonds, investors become lenders. They invest your premium for potential capital growth. Like other investments, your money can go up or down, so you may not receive what you initially invested.

Fixed rate bonds or fixed rate savings accounts may not offer instant access to your cash. You might face a penalty if you want to close a fixed rate bond early.

However, this can differ between providers. It's best to check the T&Cs with your provider first.

If you think you might need access to your cash, you could research instant access savings accounts.

You might pay tax on the interest earned from a fixed rate bond. Most people can earn some interest on their savings without paying tax though.

The amount of tax you pay is different for each person and can depend on a number of factors.

The interest rates on fixed rate bonds and savings products are linked to, but not dependent on, the Bank of England base rate and other market rates. The interest rate you get on a fixed rate product will stay the same from the start to the end of your term.

Interest rates for all other NatWest savings products could go up or down at any time.