Fixed Bonds for UK Savers: How Good a Deal Is it?
For UK savers who are looking for ways to make long term gains in these difficult economic times, fixed bonds may provide an attractive solution. Although fixed bonds do require savers to tie up their savings for a number of years (usually 1 to 5), these financial products generally offer interest rates a full point about the standard savings account, whether of the “notice” or “no notice” variety. Thus, if you can safely avoid accessing your savings for 1 or more years, fixed bonds are a way to maximize your returns.Fixed bonds may be an especially good choice for long term financial planning given that that Bank of England recently elected to leave monetary policy unchanged at 0.5% and to hold quantitative ease unchanged at 125 billion GBP. This means that banks can continue to offer longer-term debt with confidence that the monetary policy will stay low. Thus, fixed bonds can be issued that offer better interest rates than notice or no notice savings accounts. Furthermore, the rates on a fixed bond are, as the name suggests, fixed. You do not have to worry about the rate of return falling as the financial and political climate changes.There are a few questions UK savers should ask themselves before investing in fixed bonds, however. Placing money in a multi-year bond means that those funds cannot be accessed without penalty until the bond matures. In some cases, those penalties mean that the saver will come away with less than they would have earned in a traditional savings account. Therefore, it is important to consider your financial stability and the likelihood that you will need your savings in the near future. Choose a length of term that fits your situation, rather than just taking the one that offers you the highest return.
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