Fixed Rate Bonds: Are They Safe? | Shepherds Friendly (2024)

When it comes to saving for your future, getting started is often the hardest part. It can be tricky to figure out where to save your money, how much to put away, how often, for what length of time, and so on, as the choices seem endless. One of the biggest concerns you may have if you’re new to savings plans is around the safety of your money, as there aren’t always guarantees that your money will grow as much as you’d like it to. However, there are some options that are less risky than others.

There are plenty of different savings vehicles out there for you to consider, and a Fixed Rate Bond is one that could be suited to you – but how safe are these to save in? Find out in our expert guide below.

What differs a Fixed Rate Bond from other savings options?

One of the main ways that a Fixed Rate Bond differs from a lot of other savings options is that your money is locked in for a fixed amount of time with a fixed interest rate. This applies until your plan matures, after which you can access the money in the bond.

Another difference is that a Fixed Rate Bond is a single lump sum contribution made at the start of your plan, that you cannot add to throughout the fixed timeframe. Your money will then build up at the rate of interest agreed when you started your plan. This can make it a reliable savings option, as you know exactly what you’re going to get at the end of the set period, unlike many other types of savings plans. Therefore, Fixed Rate Bonds are often considered a safer choice, depending on your savings goals and appetite for risk.

In comparison, other types of investment or savings plans such as a may be subject to periods of market volatility or fluctuating interest rates, so with these options the value of your returns can go up and down over time. Another notable difference with savings and investment plans that aren’t fixed is that you can take your money out at any time, which you can’t do with a Fixed Rate Bond.

Benefits of a Fixed Rate Bond

There are plenty of benefits to a Fixed Rate Bond savings plan, some of which include:

  • A guaranteed interest rate for the full length of the term – there is no chance of this fluctuating. Therefore, you know exactly what amount of money you’ll get back when the bond has matured.
  • Higher interest rates than typical easy-access savings plans.
  • Fixed Rate Bonds are a good way to diversify your financial portfolio – having one of these means that you have back up funds waiting for you further down the line, which can complement the other ways you manage money.
  • With Shepherds Friendly, your savings plan is kept safe and steady for the whole term as your bond has guaranteed protection.

One of the biggest appeals of a Fixed Rate Bond savings plan is that it provides you with certainty – you know precisely how long your money will be put away for and what interest rates will be locked in, so there is no question of how much it will be worth when it matures.

Are Fixed Rate Bonds covered by the FSCS?

Our Fixed Rate Bonds are covered by the FSCS (Financial Services Compensation Scheme), therefore, if anything were to happen to your Fixed Rate Bond savings plan with us, your deposit and interest earned would be safe regardless of this. This means you have one less thing to worry about! Our bond acts as a life assurance policy as well as a savings plan, so if you were to pass away during the five years the plan is active, your estate would receive 101% of what you’ve saved plus interest earned.

What are the risks of Fixed Rate Bonds?

Whilst Fixed Rate Bonds are considered a safer savings option, there are still some risks involved. One of the main things to keep in mind with this type of plan is that there are different term lengths and interest rates.

Usually, the longer you lock in, the more chance there is that interest rates will change outside of your bond, which may or may not work in your favour. This isn’t something that can always be predicted, especially for long-term plans, as interest rates are harder to forecast further into the future. For example, some plans offer you the option to save for a decade or more, which could potentially yield lower returns over time. At Shepherds Friendly, our Fixed Rate Bond is for a set period of five years.

With Fixed Rate Bonds, you cannot withdraw money from the plan until it has matured (at the end of the agreed term). Therefore, this could be a risk for you if you wish to access your savings before the set time has passed. With our Fixed Rate Bond, you may access your money in exceptional circ*mstances though, for example, if you were diagnosed with a terminal illness.

It’s always important for you to give careful consideration to how much you can afford to put away. Whilst this could be seen as a risk involved with the bond, if you only put away an amount you know that you can afford, then it shouldn’t be an issue. Having an emergency fund as another form of savings is also a great idea to give you added financial security. This can also mitigate the risks of a Fixed Rate Bond, as you can fall back on your emergency fund should you have an unexpected expense or loss of income.

Are Fixed Rate Bonds a safe way to save?

All in all, Fixed Rate Bonds are considered one of the safer savings options available, as you know how much money you’ll get back when your plan matures, and when this will be. You also avoid the risks involved with market volatility. Therefore, Fixed Rate Bonds present fewer threats than many other types of savings plans. A Shepherds Friendly 5 Year Fixed Rate Bond is a great savings option for you to consider if you want to know exactly what your plan will be worth once it matures after the 5-year term.

Open a 5 Year Fixed Rate Bond

Fixed Rate Bonds: Are They Safe? | Shepherds Friendly (2024)


Fixed Rate Bonds: Are They Safe? | Shepherds Friendly? ›

Level of risk – Fixed rate bonds can be considered a safe savings plan, as you're guaranteed to receive your initial deposit back as well as any accrued interest. The level of risk for an ISA depends on the type. A Cash ISA will have a low level of risk as you're guaranteed to get back at least what you've put in.

Is my money safe in a fixed rate bond? ›

All in all, Fixed Rate Bonds are considered one of the safer savings options available, as you know how much money you'll get back when your plan matures, and when this will be. You also avoid the risks involved with market volatility.

Can fixed rate bonds lose money? ›

With fixed-rate savings bonds you know at the start exactly how much you'll get when the term of the account ends (when it 'matures'). Your original investment won't hold its value in real terms (its 'buying power') if the interest you're getting is less than the rate of inflation over the investment period.

What are the disadvantages of a fixed rate bond? ›

It's also important to consider the disadvantages of a fixed rate bond. For example, you will lose access to your money for the length of the term. Before you open a fixed rate bond, evaluate your financial circ*mstances carefully. Make sure you can commit to putting your money away for a set period.

What happens to fixed term bonds when someone dies? ›

Banks have different policies about what happens to your bonds after death. In some cases, the next of kin can close the account at the time of their choosing so as to keep the returns generated, but other banks will keep the account open in the deceased's name until the end of the bond's term.

Are 5 year fixed rate bonds worth it? ›

A 5-year Fixed Rate Bond could be a good home for your savings if you don't need to access your funds for 5 years. Fixed Rate Bonds often offer better rates than notice accounts or easy access accounts.

Which bond is considered to be the safest? ›

Treasuries are considered the safest bonds available because they are backed by the “full faith and credit” of the U.S. government.

What happens if the bond market crashes? ›

So, if the bond market declines or crashes, your investment account will likely feel it in some way. This can be especially concerning for investors with portfolios heavily weighted toward bonds, such as those in or near retirement.

Why am I losing money on bonds? ›

What causes bond prices to fall? Bond prices move in inverse fashion to interest rates, reflecting an important bond investing consideration known as interest rate risk. If bond yields decline, the value of bonds already on the market move higher. If bond yields rise, existing bonds lose value.

Are bonds a good investment in 2024? ›

As inflation finally seems to be coming under control, and growth is slowing as the global economy feels the full impact of higher interest rates, 2024 could be a compelling year for bonds.

What is the best 1 year fixed rate bond? ›

One-year fixed savings accounts
  • My Community Finance 1 year Fixed Rate - 5.15% AER. ...
  • Hodge Bank 1 Year Fixed Rate Bond - 5.14% AER. ...
  • Beehive Money One Year Bond Issue - 5.1% AER. ...
  • Charter Savings Bank 1 Year Fixed Rate Bond - 5.09% AER. ...
  • Atom Bank 1 Year Fixed Saver - 5.05% AER. ...
  • Stream Bank 1 Year Fixed Account - 5.05% AER.
May 15, 2024

Are fixed rate bonds tax free? ›

If you have access to withdraw any of the funds at any time, then the interest will be taxable in the year in which it arises. If you have an account where you cannot access the funds until the end of a set term, then the interest would be taxable at the end of the fixed term, when you can access the funds.

What happens when a fixed rate bond matures? ›

Once your existing Online Fixed Rate Bond matures, we will transfer your savings to an Instant Savings Account that lets you access your money when you need it but still earn interest on your savings.

Are 1 year fixed bonds a good idea? ›

One year fixed rate bonds are a great short-term savings option as rates tend to be higher than on notice and easy access accounts. Most one year fixed rate bonds do not let you access your money early. The best rates usually offered by challenger banks.

Are bonds better than savings accounts? ›

Higher rate of return: Currently, the combined rate of I bonds is set at 5.27%, which is significantly higher than the average return you'd find with a traditional savings account, money market account , or certificate of deposit (CD).

Can I cash my deceased parents' savings bonds? ›


Series EE, Series E, and Series I bonds can be cashed at a local financial institution. Some of these transactions may have to be forwarded for further processing. Series HH and Series H bonds must be sent to one of the addresses shown at the bottom of the following page.

Do bonds have financial risk? ›

Risk Considerations: The primary risks associated with corporate bonds are credit risk, interest rate risk, and market risk. In addition, some corporate bonds can be called for redemption by the issuer and have their principal repaid prior to the maturity date.

What is interest rate risk on fixed rate bonds? ›

Interest rate risk is the potential that a change in overall interest rates will reduce the value of a bond or other fixed-rate investment: As interest rates rise bond prices fall, and vice versa. This means that the market price of existing bonds drops to offset the more attractive rates of new bond issues.

What happens to a savings bond when the owner dies? ›

If only one person is named on the bond and that person has died, the bond belongs to that person's estate. If two people are named on the bond and both have died, the bond belongs to the estate of the one who died last.

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