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Top 5 Fixed Rate Bonds for UK 2020

Looking for more information on a range of fixed-rate bonds for purchase? See our range of the best fixed-rate bonds and brokers for 2020.
Kane Pepi
Author: Kane Pepi
Last Updated: March 24, 2020
Fixed Rate Bonds UK
Fixed Rate Bonds UK

Bonds are one of the most diverse asset classes in the financial investment space. In fact, trillions of pounds worth of bonds are traded every year by investors of all sizes.

Whether it is government bonds or corporate bonds, investing in bonds is one of the most important aspects of a well-balanced investment portfolio and provides numerous benefits such as fixed-rate bond returns and lower volatility than stocks.

However, investing in bonds for the very first time can seem complicated. Which bond should you invest in? What kind of bond is best suited to my investment style? And which bond broker should I choose? These are all questions that investors seek the answers to, and which we will answer in this comprehensive guide to investing in bonds.  We will discuss everything you need to know, such as how bonds work, the different types of bonds you can buy, how much you are likely to make, and how you can get started with bond investment today.

Table of Contents

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    Note: It is important to select a reputable, established bond broker when investing in bonds. Take a look at our rating system below to find out what you should be on the lookout for when selecting a bond broker. 

    What is a Fixed Rate Bond?

    Fixed Rate Bonds UK

    First and foremost, what exactly is bond? In their most basic form, bonds are a tool for large companies and governments to raise funds. As the amount of money that these institutions need to raise is so large, there isn’t a single bank that could lend it to them. Instead, the funds are raised by a large number of people in the form of bonds.

    In return for buying bonds from companies or governments, investors receive interest payments. As we will discuss further in our guide, these interest payments will vary quite considerably depending on the length of the agreement, the risk levels, and more.

    Before we go any further, let’s take a look at a very quick example to set the scene.

    • You invest £10,000 into UK government bonds
    • The term of the bond is 5 years
    • The yield on the bonds is 3%
    • At the end of year 1, 2 and 3, you will receive 3% in interest payments from the government
    • Once the bonds expire (3 years) you will receive your original £10,000 back in full
    • You would have made £900 in interest payments (£300 per year) over the course of the bond agreement

    The above example is very basic, meaning that there is so much more you need to consider before making an investment.

    Top 5 UK Bond Brokers for 2020: Reviewer’s choice

    Reviewers Choice
    Invest In A P2P Loan With Property Crowd | Specialist For Construction Businesses
    Account Type
    Fixed-rate bonds
    Minimum Initial Deposit
    Interest Rate
    10% p.a
    Hargreaves Lansdown
    Account Type
    Fixed-Rate Bonds
    Minimum Initial Deposit
    Interest Rate
    1.9% AER
    IG Index
    Account Type
    Fixed rate bonds
    Minimum Initial Deposit
    Interest Rate
    Account Type
    Fixed rate bond
    Minimum Initial Deposit
    Interest Rate
    Account Type
    Fixed rate bond
    Minimum Initial Deposit
    Interest Rate

    What Different Types of Investment Bonds are There in the UK?

    There is a vast range of bond types that people invest in, each with different characteristics. Below is a list of the main bonds that people invest in.

    • Corporate Bonds: Bonds issued by large companies
    • Government Bonds: Bonds issued by governments
    • Property Bonds: Bonds backed by property, or to fund property developers
    • Savings BondsBonds issued by banks or building societies
    • Bond ETFs: Trade bond prices on the open marketplace without owning the bonds

    Why do People Invest in Bonds?

    Ultimately the reason people invest in anything is to earn a return on their investment, and bonds are no exception.  Bonds as an asset class offer several unique attributes that make them attractive to a wide variety of individuals.

    While there are exceptions, bonds pay a fixed rate of interest, at regular intervals, and on pre-determined dates.  The income stream that you earn when buying a bond is predictable.  Come rain or shine, as long as the issuer of your bond doesn’t go bankrupt, you get your interest payment.  Generally, interest is paid every 6 months but there are variations depending on the type of bond you buy.

    Bond prices and stock prices tend to move in opposite directions. When bond prices are rising, often the stock market is performing poorly, and vice versa.  Because of this “lack of correlation” many investors who hold a lot of stocks in their portfolio, will add some bonds into the mix to cushion the blow if the stock market does poorly.

    As we discuss in greater detail in our article on bonds and taxes, certain bonds, such as Treasury and municipals,  offer some unique tax benefits which include not having to pay federal, state, and or local government taxes.

    As we discuss in greater detail in our lesson on interest rates, one of the largest factors that affect the price of a bond is movement in interest rates.  As many types of bonds are very sensitive to changes in interest rates, oftentimes individuals find them a good instrument to speculate on the future direction of interest rates.

    Note: Government bonds and corporate bonds must be purchased through an intermediary online broker. For this reason, selecting the right broker is crucial when investing in bonds. Take a look at our rating system to find out what you should be on the lookout for when selecting a bond broker. 

    Pros and Cons of Investing in Bonds

    Before you buy bonds, you should consider the advantages and disadvantages of this type of investment. While bonds have some disadvantages, we consider bonds to be one of the safest investment options out there.


    • Ability to earn regular, fixed interest payments
    • You can choose your risk levels and the rate of return
    • Government bonds issued by strong economies are as safe an investment as it gets
    • Some bonds allow you to invest small amounts
    • You can trade bonds on the open marketplace
    • Bond agreements last from 1 year all the way up to 100 years


    • Foreign government bonds are difficult to buy if you’re not an institutional investor
    • The most secure bonds pay really low yields

    How To Invest in Bonds in the UK

    Flag of the United Kingdom

    Institutional investors are able to buy bonds directly from the issuer as they are purchasing significant quantities. However, if you are an everyday investor, then it’s likely that you will need to go through a broker.

    However, this isn’t always the case.  You can buy UK government bonds directly from the government’s online platform. Known as “Gilts”, you can choose the length of the bond agreement that best suits your investment needs. Some banks allow you to buy bonds directly from them, although it is likely that you will need to have an account with them.

    Alternatively, if you want to access the full bond market, then it’s likely that you will need to go through an online broker.

    How We Rank UK Online Bond Brokers

    As the online investment arena is now jam-packed with brokers that allow you to buy and sell bonds, we only recommend the very best. Here are some of the factors that we look at before we list a recommended broker on our site.

    • Fees and commissions
    • User-friendliness and customer support
    • Research and analytics tools
    • Number of bonds to invest in
    • Trading platforms
    • Offers and promotions
    • Number of markets accessed by the trader

    Top 5 UK Bond Brokers for 2020:

    1. Property Crowd

    Property Crowd is an innovative platform that allows you to invest in property bonds. For those unaware, property bonds work in the exact same way as any other bond. The reason they are called property bonds is that the bonds are issued by property developers. This is to help fund their operations when constructing new properties.

    The role of the team at Property Crowd is to source investment opportunities on your behalf, and then list the bonds on their platform for purchase, Investment process When the team at Property Crowd have identified a worthwhile opportunity that requires funding, they'll offer the property bonds on their platform until they are sold. You get to browse suitable opportunities that meet your risk levels. Each property bond offer will display the length of the agreement, as well as the amount of yield on offer.

    As these bonds are higher risk, the yields on offer are generally around 10%. Once you've picked an investment, you simply need to deposit funds and make the purchase. Fees and minimum deposit Property Crowd does not charge customers any fees to buy bonds through its platform. In terms of the minimum investment amount, you will need to buy at least 10 bonds. Property Crowd claims that this is usually in the region of £900.

    Our Rating

    • Access to the property development market
    • The minimum investment for bonds just £900
    • No fees to buy property bonds
    • Unable to sell property bonds before maturity
    • Its riskier than most other types of equity investments

    2. Hargreaves Lansdown

    Hargreaves Lansdown is one of the most reputable brokers in the UK space. Their diverse range of assets covers everything from stocks and shares, ETFs, mutual funds, and, of course, bonds. The platform is especially good for research analysis, as the team at Hargreaves Lansdown regularly publish their viewpoints on the majority of assets they sell. You'll find a full range of corporate bonds at Hargreaves Lansdown.

    Most of these center on banks and building societies, although other industries are covered too. In terms of corporate bonds, you can access UK government gilts. Investment process In most cases, if you want to invest in bonds with Hargreaves Lansdown you will need to contact the team over the phone. This is so that they can obtain the bonds on your behalf, and ensure that you have a full understanding as to how the bonds work. Before doing that, you'll need to open an account and deposit some funds.

    Fees and minimum deposits As you will need to use the Hargreaves Lansdown telephone service, you'll be subjected to fees. This amounts to 1% of the total amount you want to trade (minimum of £20, a maximum of £50). In terms of minimum investments, this is entirely dependant on the specific bond that you want to buy. While some have a minimum of just £500, others require a minimum investment of £50,000.

    Our Rating

    • Huge reputation and heavily regulated
    • Excellent research analysis department
    • A highly extensive listing of corporate bonds
    • Need to trade bonds over the phone
    • 1% fee to trade bonds (minimum £20, maximum £50).

    3. IG

    IG is a broker that specializes in CFD (Contracts-for-Difference) products. For those unaware, this means that you can speculate on the price of an asset without actually owning it. If you're looking for exposure to the foreign bonds markets, then IG is one of the few platforms that will allow you to access them. Investment process IG allows you to invest in government bonds, which includes bonds from Germany, Italy, and France, as well as 2, 5, and 10 year T-bills from the U.S. It is absolutely crucial that you understand you will not receive any interest payments.

    These products operate as an ETF, insofar that you are speculating on whether the value of the bond will go up or down. This can be a high-risk strategy if you don't know what you're doing. If you want to get started, simply open an account, deposit some funds, and choose the bonds that you want to invest in. Fees and minimum deposits IG requires users to deposit at least £250 into their account in order to invest in bonds. You can deposit with a range of methods, such as a debit/credit card, and even an e-wallet. As you are trading CFDs, you can buy very small quantities of bonds.

    • Access to foreign government bonds markets
    • Minimum deposit just £250
    • Accepts debit/credit cards and e-wallets
    • Specializes in CFDs and therefore won't distribute dividends
    • Charges inactivity fees

    4. CapitalRise

    CapitalRise operates in a very similar manner to Property Crowd. The platform allows you to loan money to property developers, which is then used to help pay for new construction projects. In return for your investment, you will receive monthly interest payments. At the end of the specified term, the development company will then repay your original investment in full.

    In this sense, the CapitalRise model resembles traditional bonds in all but name. Investment process Once you've opened an account, you'll then be able to view the list of property development investments on offer. Each investment proposal will display its annual yield, as well as the length of the agreement. It is important to note that CapitalRise accepts just 2% of applications from property developers, so a lot of due diligence is performed before the investment proposal goes live.

    Fees and minimum deposit There are no fees charged by CapitalRise when you deposit funds. You also won't pay any transaction fees when you make an investment. The minimum investment amount is £1,000.

    • High returns on offer
    • Good choice of projects to back
    • Invest in bonds with no fees
    • Not traditional bonds

    5. DEGIRO

    DEGIRO offers a highly comprehensive suite of assets for everyday investors to choose from. This covers everything from stocks, mutual funds, indices, ETFs, and bonds. Their bond offering is mainly dominated by corporate bonds, however, you'll likely find the odd government bond such as those offered by the U.S., UK, and EU.

    Investment process You will need to make a deposit from a UK bank account before you get to view the full range of products on offer at DEGIRO. This ensures that you are the rightful owner of the bank account used to fund the account. Once your account is funded, which usually takes 2 working days, you'll be able to purchase your chosen bonds.

    Fees and minimum deposits You can deposit as little as £1 into your DEGIRO account. In terms of fees, this will depend on the specific bond you want to purchase. However, fees at DEGIRO are typically industry-leading, especially when accessing foreign markets.

    • Users can invest in a significant selection of corporate bonds
    • Minimum deposit just £1
    • Heavily regulated
    • Limited government bonds listed here

    Top 5 Investment Bonds 2020

    If you’re looking for some guidance as to the best bonds to invest in for 2020, we’ve presented five suggestions. These are the bonds that we have found to be capable of generating the highest yields. Don’t forget, you should never buy bonds on the back of other people’s advice, so always do your own independent research.

    1. UK Government Bonds (Gilts) - 10 Year - 1.10%

    If you're from the UK and looking for one of the most secure assets in the market, then you'll likely need to consider UK government bonds. Known as Gilts, you have the choice of 2, 5, 10 and 30-year terms. If you're happy to invest in bonds for 10 years, you'll achieve a fixed annual yield of 1.10%. Although some investors would see this as too much of a conservative investment, you're at least all-but guaranteeing the security of the yield. Each bond is sold in denominations of £100.

    Our Rating

    2. Al Rayan Bank - 2.52% - 3 years

    Al Rayan Bank - a UK based bank that specializes in Sharia-compliant financial services, is currently offering three-year bonds with an annual yield of 2.52%. These fixed yield bonds offer good value, especially when one considers that interest is paid quarterly. Furthermore, you can get started with a minimum investment of just £1,000.

    Our Rating

    3. Union Bank of India UK - 2.15% - 5 Years

    The Union Bank of India UK is offering UK savers a five-year bond that pays an annual yield of 2.15%. The interest offered is fixed, meaning that you can easily calculate your overall returns. You can deposit a minimum of £5,000, all the way up to £340,000.

    Our Rating

    4. Post Office Money - 1.90% - 3 years

    The Post Office Money offers good value bonds with a minimum investment of just £500. If you are happy to hold on to your investment for the three-year term, you will receive a fixed rate yield of 1.90%. You also have the choice of receiving your interest payments on a monthly or annual basis. If you attempt to close your bond before the maturity date, then you'll likely receive less than you invested.

    Our Rating

    5. Aldermore - 1.85% - 1 years

    Founded as recently as 2009, Aldermore is a UK based retail bank. If you only want to invest in bonds on a 1-year maturity period, then the institution is currently offering fixed yields at a rate of 1.85%. You can invest from as little as £1,000, although be warned, you can't exit the bond agreement early. However, as these short-term bonds will mature in just 12-months, this shouldn't be an issue.

    Our Rating

    Note: Buying foreign government bonds, especially those from emerging markets like Turkey or Kuwait, is virtually impossible for the average investor. Brokers don’t like to keep these types of bonds on their books, as the risk levels are super high. Instead, you’d need to get a broker to buy them on your behalf. However, the minimum requirements are usually significant, often running into the millions of pounds.

    How Does a Bond Investment Work?

    Golden fountain pen nib on a paper written Bonds

    Each and every bond available to buy will have its own risk level. The higher the risk, the higher the yield. Don’t forget, the yield is the annual interest payment that the company or government will pay you as a reward for lending them money.

    Before we look at the risks of bonds in more detail, let’s first explore some of the most important characteristics of bonds that you need to understand.


    First and foremost, you need to assess the maturity of the bond. In plain English, this is the length of the bond agreement before it expires. In the vast majority of cases, the minimum term is 1 year. At the absolute extreme, the longest bond currently available is a 100 year U.S. government bond, otherwise known as a “Treasury Bill” or “T-Bill”.

    If you’re wondering why anyone in their right mind would invest in a bond that doesn’t return the original investment for 100 years, we’ll explain how this works further in our guide.

    Typically, retail investors like you and I will purchase bonds with a maturity date of between 1 and 10 years.

    We should also note that the longer the bond agreement, the higher the returns. This is because, technically speaking, the longer the company or government has to pay you back, the higher the risk.

    When we talk about yield, this is the amount of interest you are going to receive during the term of the bond agreement. The amount is expressed as a percentage, which makes it simple to calculate how much you are likely to make.

    For example, if the yield on a bond is 5%, this means that you will be paid 5% in yearly interest payments. Take note, some bonds pay their interest payments on a quarterly basis.

    If this is the case, and the yield is expressed as 5%, don’t be fooled into thinking that you’ll receive 5% every three months. This is still the amount you’ll receive on an annual basis.

    The yield rate is set by the company or government that issues the bonds.


    Who Issues Bonds?

    There are two different types of bonds that you can buy. If the bonds are sold by a company, they are known as “Corporate Bonds”. Otherwise, if the bonds are sold by a government, they are simply known as “Government Bonds”. In order to ensure that you have a full understanding of the two, we’ve broken them down further below.

    Government bondsCorporate bonds

    Illustration of green cash bills, a bond paper and a cone-shaped building

    When governments need to raise more money to pay for key services (such as paying for the police, health system, pensions, ect.), they have two options. They can either print more money (which is a really unpopular move as this means the taxpayer will effectively pay for it), or issue bonds.

    As such, when you buy government bonds, you are lending money to the government in order to make a profit. In the UK, government bonds are known as “Gilts”, however, they operate in exactly the same way as any other government bonds.

    The amount of yield that government bonds pay will ultimately depend on the strength of the country’s economy.  Strong economies like the U.S. and UK will pay really low yields while emerging economies like Brazil and India will pay much higher yields.

    To give you an idea of what sort of yields you can expect from government bonds, look at the below example. The yields represent 10-year government bond yields at the time of writing.

    • UK: 1.14%
    • USA: 2.47%
    • CANADA: 1.73%
    • AUSTRALIA: 1.74%
    • GREECE: 3.52%
    • BRAZIL: 8.79%
    • INDIA: 7.41%

    As you’ll see from the above example, the yield rates offered by governments on the bonds they issue can vary quite considerably.

    Illustration of corporate bond papers

    On top of government bonds, you can also invest in corporate bonds. This is where large companies need to raise a significant amount of cash to fund their operations. There are thousands of corporate bonds available to choose from, from a vast range of industries. They work in exactly the same way as government bonds, however, in some cases, the returns can be higher.

    The reason for this is that while companies could well go bust, it is highly likely that governments won’t. After all, if they can’t meet their bond obligations, they can simply print more money. This is something that corporations can’t do.

    To give you an idea as to some of the yields that you can earn with corporate bonds, take a look at the below examples.

    • Anglo American Capital: 4.125% (expires September 2022)
    • HSBC Bank: 5.375% (expires November 2030)
    • Marks and Spencer: 4.75% (expires June 2025)
    • Severn Trent: 6.125% (expires February 2024)

    Best 1-year fixed-rate bond

    Are you looking for a short-term savings plan whose returns outperform every other instant access savings accounts? Are you looking for a fixed-return savings plan whose interest out-competes inflation rates, effectively guaranteeing the integrity and value for your money?A pile of golden coins

    Consider locking up your funds in a one-year fixed-rate bond that offers fixed annual incomes of up to 2%+ per annum. These accounts are designed to offer fixed rates for a fixed term implying that you will have to commit to locking up your savings for at least 12 months in exchange for the guaranteed fixed interest rate.

    But the promise of fixed and guaranteed returns isn’t the only thing that makes the one-year bonds all popular. Others include the fact that most of these bonds are offered by FCA registered and regulated institutions whose deposits are protected by the Financial Services Compensation Scheme (FSCS) to a maximum of £85,000. Plus you have the chance of maximizing the returns by avoiding capital gains and income taxes charged on the returns of regular the bonds if you choose to invest your annual Individual Savings Account allowance here.

    Let’s look at some of the best performing one-year bonds in the country as well as more reason you should consider saving in one.

    Note: One of the one-year top fixed rate uk bonds is considered better than the easy access savings accounts due its higher than average interest rates. However, accessing the guaranteed high returns means surrendering access to your savings by locking them up for one year and facing punitive interest loss for every premature withdrawal request.

    Why would you lock up your funds in a 1-year fixed-rate bond?

    • Doesn’t lock funds for longer than necessary

    What happens when you land a windfall and aren’t sure what to do with the cash at the moment or just want to shield a significant portion of it from taxation? You save it in a 1-year bond while categorizing it as an ISA, as long as it doesn’t exceed your annual limit of £20,000.

    • Compounded interest through auto-reinvestment may be higher

    The interest rates difference between a one-year fixed-rate bond and its two or three-year counterparts is negligible. In some cases, going for the one-year bond and auto-reinvesting the principal amount plus accrued interest upon maturity may bring in higher returns than the longer-term bond.

    • Most require little minimum initial deposit amounts

    You can open a fixed rate one-year bond with as little as £50 and save in excess of £1 million with most of these bonds.

    • Highly flexible

    The one-year savings/investment plan is more flexible when compared to the medium and long term plans like the five- and seven-year investment options. Plus if you decided to discontinue the one-year fixed bond prematurely, the penalties will be less severe compared to the ones associated with the long term investment options.

    • Helps you avoid cash misappropriation

    If you have cash at hand but aren’t sure what business to open at the moment or have other commitments that might hold you back from productive use of these funds,  you should consider locking them up in a fixed rate bond. This not only helps you avoid misappropriating this cash but also ensures that you get attractive returns from the savings.

    What are the Pros and Cons of 1-year fixed-rate bonds?

    Before you buy bonds, you should consider the advantages and disadvantages of this type of investment. While bonds have some disadvantages, we consider bonds to be one of the safest investment options out there.


    • Offer a defined income stream as opposed to irregular dividends
    • They carry minimum risk as your deposits are FSCS protected
    • One-year bonds are fairly liquid
    • Discourage misappropriation of cash and can be used as a safe haven while you craft an investment option
    • They are less volatile and not affected by the money market performance


    • Penalizes premature withdrawals and account termination
    • One may consider their rate of returns relatively lower compared to such other investments as the shares and forex investments.
    • You stand to lose most of your investment should the bond service provider go under

    Criteria used to rank different 1-year ISAs:

    • The annual rate of return on investment
    • The minimum initial deposit amount
    • FCA regulation and FSCS protection
    • Risk exposure
    • The regularity of interest payments
    • Ease of account opening and management
    • Support for ISA
    • Support for withdrawals and penalties associated with premature account closure

    Best performing interest one-year fixed rate bonds in the country:

    • Quite flexible policies for a fixed rate deposit taker
    • Quite flexible policies for a fixed rate deposit taker

    1. Bank of London and the Middle East (BLME) - 2.20% returns pa

    At an interest rate of 2.20% interest per annum, the Bank of London and the Middle East (BLME) promises the highest returns for the one-year fixed rate deposit account. But this bond requires a minimum initial deposit of £1,000 and has its maximum operating balance capped at £1 million. It is important to note that that BLME operates under Islamic finance principles and that it is fully sharia-compliant.

    The high-yield account can only be opened and managed online by any United Kingdom resident above 18 years. It also supports ISA deposits. You will however not be allowed to make additional deposits or withdraws into the account after the 7-day cooling-off period when it goes live. Plus the interest here is compounded and only paid upon the maturity of the one-year bond.

    Our Rating

    • Relatively high-interest rates
    • Quite flexible policies for a fixed rate deposit taker
    • Deposits into the account are FSCS protected
    • One may consider the account relatively rigid
    • Doesn’t support monthly interest payouts

    2. Al Ryan Bank – 2.17% returns pa

    Al Rayan is yet another Sharia-compliant banker offering the 12-month fixed term bond at an attractive expected profit rate of 2.17% per annum. Apart from the competitively welcoming rate of return, the Al Rayan Bank is considered one of the most versatile savings accounts. This is premised on the fact that it maintains an affordable minimum investment amount of £1,000 and an unlimited upper limit for the account’s operating balance.

    The fixed-term bond account can also be opened and managed by anyone above 16 years online, over the phone, via the post office or at the bank's physical branches. More importantly, you can choose to have your interest paid quarterly or compounded and paid out upon the expiry of the bond after 12 months. It, however, doesn’t support additional deposits into the account and withdrawals attract a loss of interest penalty.

    Our Rating

    • A highly versatile bond that allows for easy account opening and management
    • Sharia compliance reinforces the profit guarantee
    • Doesn’t have a limit to the amount of money you can deposit here
    • Relatively illiquid savings plan with penalties on withdrawals
    • Poor customer support

    3. Gatehouse Bank – 2.00% returns pa

    Gatehouse Bank offers an interest rate of 2.00% for its one-year fixed-rate bond that is currently available to any United Kingdom resident above 18 years. The account can only be opened online but allows for easy management online, via email and over the phone. You will need a minimum of £1,000 to open the account that currently has a maximum operating limit of £85,000. You will not have easy access to your funds once the bond account goes live and any withdrawals will be penalized with the loss of 90-day interest. The Gatehouse Bank bond is, however, one of the one-year fixed-term savings plans that allow for further deposits.

    The interest for the bond is nonetheless compounded and will only be paid out upon maturity of the bond. The bank also operates under the Islamic finance principles and is Sharia-compliant meaning that the interest rates listed here are what you can expect upon maturity.

    Our Rating

    • Guaranteed fixed interest rates under Islamic laws
    • Allows for further additions into the fixed term account long after opening
    • Relatively easy account opening and management online and over the phone
    • Low maximum account balance limit – at £85,000

    4. Metro Bank – 2.00% returns pa

    Metro Bank’s 1-year fixed-rate bond is one of the few savings accounts with the most affordable minimum initial deposit for a fixed term bond that stands at £500. And a high maximum account limit that is currently set at £2 million. It is also one of the most versatile one-year fixed-rate bond accounts as it allows for physical branch, online, and over the phone account opening and management. Plus it is open for any United Kingdom resident above 16 years. The banker doesn’t encourage additional deposits into the fixed term bond but maintains a 30-day cooling-off period, during which time you can deposit as much you want.

    After this, the account is locked and you cannot make a partial withdrawal before maturity. Premature withdrawals are subject to 90-day loss of interest that effectively means you stand to get back less than your initial deposit. You can nonetheless choose to have the interest paid monthly or compounded and paid at maturity.

    Our Rating

    • Deposits are FGSCS protected up to £85,000
    • Locking in the funds minimizes misuse and misappropriation
    • Affordable minimum initial deposit
    • The account cannot be opened or managed via post

    5. First Save– 1.95% returns pa

    First Save also operates a fixed-term one-year bond that has an annual interest of 1.95%. To access these highly competitive rates, however, you must commit your funds to a 12-month lock-up and have a minimum £5,000 investment with the maximum account operating balance set at £2 million. The savings account can only be opened online and will only be available to United Kingdom residents above 18 years.

    Additionally, you have the option of choosing to have the account paid monthly or compounded and paid t upon maturity of the bond after 12 months. There are no additional deposits allowed for the fixed-rate bond, plus any premature withdrawals will be subjected to loss of interest earned

    Our Rating

    • Maintains affordable minimum deposit amounts and flexible maximum operating balances
    • Highly credible finance service provider – FCA licensed and regulated
    • Straightforward online account opening and management
    • One may consider their £5,000 minimum deposit quite prohibitive
    • Sme customers have complained of sluggish support services

    6. Wesleyan Bank – 1.95% returns pa(available to existing customers)

    Wesleyan, one of the most established financial services providers in the United Kingdom, is also offering competitive returns of 1.95% for its one-year fixed-rate bond. Some of these bond unique features include the fact that it can only be opened and managed online by any UK resident above 18 years.

    The bondholder must also be willing to deposit a minimum of £1,000 into the account with the maximum operating balance allowed here set at £250,000. You are also free to direct your ISA allowance for the year or transfer previous accumulations into the account. The biggest downside to the Wesleyan one-year fixed-rate bond is that it is only available to existing Wesleyan customers – individuals that have been with the financial service provider for over one year. The interest here is compounded and only paid upon the maturity of the bond after 12 months.

    • Offered by one of the most reputable financial service providers in the country
    • Affordable minimum account operating balance
    • FCA regulated and FSCS protected deposits
    • Withdrawals are subject to the loss of 90-day interest

    7. Atom Bank – 1.93% returns pa

    Atom bank's one-year fixed-rate bond also ranks highly on the list of the most versatile bond. This is evidenced by the fact that you can open and manage the account in an easy and straightforward online process and that you only need £50 as minimum deposit while the maximum operating balance stands at £100,000. Additionally, you have the option of choosing between monthly and annual interest payouts.

    The account is also open to any UK resident above 18 years. You are however not allowed to make additional deposits into the account plus any premature withdrawals result in the loss of 90-day interest.

    Our Rating

    • Maintains the most affordable minimum deposit
    • Deposits here are FSCS protected
    • Straightforward regisyration process
    • One may consider their £100k maximum operating balance limiting
    • No bank cards issued

    8. ICICI Bank UK – 1.92% returns pa

    ICICI Bank’s HiSAVE fixed-rate one-year bond comes off as one of the most unique companies with no upper limit to the amount of money you can save here. And the minimum operating balance stands at an affordable £1,000 with the fixed-rate interest set at 1.92% per annum. You have the option of having the interest paid out on a monthly basis at the rate of 1.91% per annum or compounded and paid at the end of the year upon maturity.

    The account can only be opened and managed online by any UK resident above 18 years with no premature withdrawal or additional deposit options.

    Our Rating

    • Competitive annual interest rates
    • Supports monthly interest payments
    • Straightforward online account opening and management process
    • Attracts punitive penalties on premature withdrawals

    9. My Community Bank – 1.90% returns pa

    My Community is also floating a 12-month bond that promises guaranteed returns at the rate of 1.90% per annum. The account is open for anyone above 18 years that can afford the £1,000 minimum deposit , you have a 7-day cooling off period to fund the account after which all amounts therein are locked up for 12 months.

    You cannot make additional deposits and neither are premature withdrawals encouraged. You can however open and manage the account either online or via the post.

    Our Rating

    • Straightforward account opening and management
    • FCA regulated banker and FSCS protected deposits
    • Maintains relatively affordable minimum operating balances
    • One may consider their £85,000 maximum account operating balance limiting
    • Poor customer support

    10. Zenith Bank – 1.90% returns pa

    Zenith Bank’s 1-year fixed rate bond stands out in the industry not because of their attractive 1.90% interest rate but due to the fact that it is one of a handful fixed rate bond providers that you cannot open or manage online. You have to apply via post or call the bank. Interest earned here is compounded and will only be paid upon maturity or the termination of the bond. The termination or premature withdrawals are subject to the loss of 90-day interest and you only need £1,000 to open the account whose maximum operating balance is currently set at a flexible £2 million.

    After creating the bond account, Zenith Bank gives you a 7-day cooling off period during which time you can deposit as much as you want, withdraw or even close the account without any restrictions.

    Our Rating

    • The bond account can be sole or jointly operated
    • Flexible and welcoming maximum account operating balance
    • Guaranteed and highly competitive returns
    • No easy access to the deposits or premature withdrawals allowed
    • Limited financial products available

    Best 2-year fixed-rate bond

    The United Kingdom government allows you to save and invest up to £20,000 every year and earn tax free interests/revenues thanks to the government-initiated Individual Savings Accounts (ISA) scheme. How then do you plan on spending your tax free saving/investment allocation for the year 2020?

    The two-year fixed-rate bonds are your most ideal option if you are looking for a risk-free investment or a holding cell where you can keep your capital safe while you weigh the viability of different investment opportunities.Smiling man with a coffee cup on the table sitting beside a smiling woman staring at a laptop

    This deposit security guarantee is derived from the fact that most of these fixed-rate bond service providers are licensed and regulated by the Financial Conduct Authority (FCA) and that your deposits in any of these financial service providers is protected by the Financial Services Compensation Scheme (FSCS) to a maximum of £85,000 per investor.

    Note: If you are looking for a medium-term holding cell for your money, one of the 2-year top 5 fixed rate uk bonds is the ideal option for you. It offers you reasonable interest rates without necessarily holding your money for long.

    How does a 2-year fixed-rate bond work?

    Word HOW in white and red blocks with a question mark

    Put simply, fixed-rate bonds are savings accounts that allow you to deposit your money for a specified period of time, in this case, two years. They fall under the fixed term savings/investments that lock up any of the savings held here for the specified amount of time and penalize any premature withdrawals or account termination.

    You are however free to have the interest paid monthly or annually into a withdrawable checking account or compounded and paid upon maturity of the fixed-rate bond.

    What are the Pros and Cons of 2-year fixed-rate bonds?

    Before you buy bonds, you should consider the advantages and disadvantages of this type of investment. While bonds have some disadvantages, we consider bonds to be one of the safest investment options out there.


    • Most require low minimum investments
    • Earns you passive income
    • Has a higher interest rate than most other savings accounts
    • Your money is safe regardless of the economic situation


    • You cannot withdraw the amount before the term expires without incurring penalties
    • Some institutions are not protected by FCSC

    Criteria used to rank best 2-year fixed rate bonds:

    • Ease of account opening and managing
    • Interest rate
    • Interest paid (compounded annually vs. on maturity)
    • Withdrawal policy
    • Minimum deposit

    Best 2-year fixed-rate bond

    1. Bank of London and the Middle East (BLME) - 2.40% AER

    Bank of London and The Middle East tops our list of popular and highly reliable financial institution in the UK offering a fixed rate 2-year bond. The bond requires a minimum opening deposit of £1,000 but you are free to invest as much as £1 million. The account also allows further additions well into the life of the bond.

    Plus you get to earn a fixed interest at the rate of 2.40% AER. BLME is licensed by the FCA and deposits therein protected by FSCS so your savings will be secure. You also have the option of investing your ISA allowance here for tax free interests. You also need to link a BLME account where the interests will be paid upon maturity.

    Our Rating

    • Offers the highest interest rates
    • Maintains an affordable minimum investment
    • Deposits are FSCS protected
    • Has no introductory bonus
    • One may consider their 2.4% interest uncompetitive

    2. QIB UK - 2.25% AER

    Qatar Islamic Bank (QIB) UK is a premium banking option that offers private banking services and a wide range of personal savings including fixed rate bonds. Their 2-year fixed rate bond carries an annual interest rate of 2.25% AER that is compounded and paid on maturity of the term bond. You will need a minimum deposit of £1,000 to open an account here with the maximum savings allowed here capped at £85,000.

    You also must be 18 years of age to open a fixed rate bond saving account with QIB UK. Like most fixed-rate bond providers, QIB locks up the fixed term deposits to maturity with withdrawals being subjected to penalties. The banker is nonetheless FCA regulated and your deposits here protected by FCSC.

    Our Rating

    • Attractively high interest on deposits
    • The bank is protected by FCSC so your money will always be safe
    • Relatively affordable minimum opening deposit
    • You can only invest up to £85,000

    3. FCMB Bank UK - 2.22% AER

    The independently incorporated subsidiary of the popular First City Monument Bank, FCMB UK offers a variety of personal banking services including fixed-rate bonds. To open an account with FCMB, you are required to be 18 years and above in addition to depositing a minimum investment of £1,000. You can deposit up to £85,000 and additional funding down the line is also allowed.

    Opening an account is pretty straightforward and can be done online or at the bank branches. FCMB offers annual interest rate of 2.22% for their two-year fixed rate bonds which is significantly higher than the current interest offered by most financial service providers.

    Our Rating

    • Affordably low minimum investment
    • Offers competitive interest rates
    • A great passive income generating stream
    • You cannot save more than £85,000
    • Doesn’t allow for monthly interest payments

    4. Axis Bank UK Ltd - 2.20% AER

    Axis Bank might be a fairly new subsidiary in the UK, but it remains one of the largest lenders in India. The UK branch has some pretty amazing offers ranging from loaning services to personal accounts. You can open a fixed rate bonds account with a minimum £1,000 deposit. There are no opening restrictions provided you fill the right information.

    You must be 18 years and above and can only save up to £85,000 in a single account. Axis Bank offers an annually compounded interest rate of 2.20% paid on maturity. They also offer deposit guarantee under the protection of FCSC.

    Our Rating

    • Highly reputable financial service provider – FCA regulated
    • Competitive interests on savings
    • Deposits are FSCS protected
    • Deposits capped at the limiting £85,000 mark
    • You must have a separate transfer account where your money will be sent

    5. Raisin bank 2-year Fixed rate bond - 2.20% AER

    Raisin bank describes itself as a savings marketplace and offers a wide range of savings accounts, including a fixed term 2-year fixed rate bond that currently attracts 2.20% AER interest. Accessing the fixed rate bond service starts with opening an account online on Raisin Bank’s website for any UK resident above 18 years. Here you can a save a minimum £1,000 with the maximum capped at £85,000.

    And if you save more than £10,000, you qualify for the £100 welcome bonus that is credited to your savings account. There is no provision for monthly interest payment meaning that it is compounded and paid upon maturity of the bond.

    Our Rating

    • Straightforward online account opening and management
    • Competitive interests – well above those offered by a bank’s savings account
    • Savings above £10,000 earn you £100 welcome bonus
    • No additional deposits or withdrawals during the life of the fixed rate bond

    6. RCI Bank UK fixed rate bond – 2.11% AER

    RCI Bank, one of the most reputable financial institutions in the United Kingdom also offers a competitively priced two-year fixed rate bond. The bond is open to UK residents above 18 years that can raise the minimum £1,000 required to open the account whose maximum savings amount stands at £1 million.

    It is designed as a fixed term savings plan implying that you will have 30 days (cooling off period) to deposit as much as you can into the account before they are locked for the next two years with withdrawals or account termination resulting in loss of interest. Note that this account can only be opened and maintained online.

    Our Rating

    • Affordable minimum investment and flexible upper limit
    • Your deposits with RCI Bank are FSCS-protected up to £85,000
    • Competitive interest rates
    • Doesn’t support monthly interest payouts

    7. Paragon 2-yr fixed rate - 2.1% AER

    Paragon also ranks highly on our list of high yield financial services providers for anyone looking to save in a 2-year fixed rate bond. Any UK resident above 18 years can subscribe to the 2-year bond. You must, however, raise the initial minimum deposit of £1,000 within 30 days of opening an account. You can save up to £500,000 and your money is secured by FCSC. Paragon is among the highly recommended for UK residents and has amazing fixed rates of bonds offers. Their 2-year fixed rate bond earns you 2.1% AER which is well above the interest rate offered by most local banks and financial institutions.

    Note that Paragon doesn’t have a provision for additional deposits after the 14-day cooling-off period.

    Our Rating

    • Reliable and highly regulated financial services provider
    • One may consider their £500,000 upper limit on deposits flexible
    • Interests can be paid either monthly and annually
    • Premature withdrawals are subject to loss of 90-day interest
    • Income is subject to taxes

    8. Aldermore two-year fixed-rate bond – 2.0% AER

    Aldermore is another incredible option when looking for personal savings accounts in the UK. This long-serving financial institution offers fixed rates of bonds to any qualifying client and has amazing interest rates. Interests are calculated daily and paid either monthly or yearly. All you need to do is deposit the minimum saving of £1,000 within 14 days of opening your account.

    You can hold a maximum balance of £1,000,000 which is significantly higher than other banks. The annual gross interest is fixed at 2.00% and so is the AER with the monthly rate starting at 1.98% per annum. And while this is considered a fixed term account, you still have access to your locked funds but any withdrawal results in the forfeiture of 180 day interest for the amounts withdrawn implying that you stand to get back less than your initial deposits.

    Our Rating

    • Easy and convenient to set up
    • Guarantees security of deposits (protected by FCSC)
    • Attractive interest rates
    • One may consider their 180-day interest loss for early withdrawals rather punitive
    • Highly illiquid

    9. Investec 2-Yr Fixed Term Deposit – 1.80% AER

    Investec is another reputable and reliable premium financial services provider in the UK. Opening the 2-year fixed rate bond here is relatively straightforward and open to any United Kingdom resident above 18 years. A minimum opening deposit of £25,000 is required and you can save up to £1,000,000 in the account. It is also quite versatile as you can open and manage your account online or over the phone.

    The service provider offers a fixed term interest of 1.8% and no withdrawals can be made within the saving term with the option of having this accrued interest compounded to maturity or paid monthly. Your deposits with Investec are also protected by the FCSC.

    Our Rating

    • Risk free investment that doesn’t expose your investments to unnecessary risks
    • Convenient and easy to use
    • Attractive interest rates
    • Requires a higher minimum opening deposit (£25,000) than most alternatives
    • Premature withdrawals are subjected to loss of 90 day interests

    10. SKIPTON 2-year fixed rates bond - 1.5% AER

    The Skipton Building Society 2-year fixed rates Bond is ideal for any UK resident with a lump-sum they do not want to spend or withdraw within a period of two years. This offer comes with a 1.5% fixed interest paid either monthly or compounded and paid upon maturity of the bond.

    The society maintains a 7-day cooling-off period during which you can deposit as much as you can into the account including transferring in your accumulated ISA savings. You will be interested to note that the fixed-rate bond is open to all United Kingdom residents above 16 years that can raise the £500 required as a minimum initial deposit with the maximum allowable savings set at £1 million.

    • Has a low minimum opening deposit of £500
    • Relatively straightforward account opening and process
    • Highly reliable and reputable investment bank
    • One may consider their 1.5% interest relatively low

    Why save in a 2-year fixed-rate bond?

    • Safe and secure

    Most fixed rates bond accounts are offered by banks and other financial institutions protected by FCSC (Financial-Service-Compensation-Scheme). This protection offers a guarantee that your money will be safe even if the bank fails, FCSC will reimburse you to maximum £85,000 (including interests) per savings account held with different banks/deposit-taking institutions.  The savings are also safe from market variables such as inflation.

    • Fixed interest

    Unlike other easy-access personal savings accounts, 2-year fixed-rate bonds offer a pre-determined interest rate that does not change. Most easy-access rates are variable and can be changed at the bank’s discretion. With fixed-rate bonds, your interest remains the same provided you see out the term.

    • Earns passive income

    Besides securing your money in an inaccessible vault, fixed-rate bonds earn you passive income on your savings. Simply save and forget, then come back at the end of the term to collect your money plus interest.

    • Helps avoid mismanagement or resources

    The lock up of these funds for two years, the caveat and penalties on withdrawals aren’t just supposed to protect the deposit takers’ interests, they also go a long way in helping you avoid misappropriating this cash. The risk of losing interest or even getting back less than your deposits prevents unnecessary withdrawals that characterize the savings in a conventional checking account.

    • Risk-free

    Unlike most high yield investments in the forex markets or stocks, savings held in a fixed rate bond are risk-free as they are not subjected to economic volatilities. The fact that they are fixed further implies that that the guaranteed interest rates won’t change, even in the most tumultuous economic markets.

    How to go about choosing a 2-year fixed-rate bond

    Although there are many banks and financial institutions offering fixed-rate bonds, not all of them suit everyone. There is no single fit-for-all and your decision should be informed by your unique needs. Some of the considerations to make prior to saving with any bank include:

    • Credibility and security

    As aforesaid, not all banks are protected by FCSC, so it is important to carefully review the security features. Choose credible licensed financial institutions that can guarantee your savings and interest will be paid in full no matter what happens

    • Eligibility requirements

    Different banks have different requirements and policies. It is advisable to carefully read through the terms and policies before opening an account. Check the minimum age, opening deposit and requirements, penalties, early-access terms, and basic eligibility factors.

    • Online presence

    You need to save with a credible business with a strong online presence. Check out their online platform, design usability, customer support and any other unique features offered. Choose a user-friendly platform with a sleek interface and fast-loading pages.

    • Interest rates

    This is, of course, one of the priority determinants when choosing a fixed rate bond. Banks and lenders with higher interest rates are usually more attractive since you will be making more passive income. However, make sure the site meets all the other aspects especially security and savings guarantee. This way, your money remains intact even if the bank fails.

    • Market reputation

    Credible reliable banks usually attract a positive reputation in the markets they serve. While this may be difficult to review, there are a few things you can look up to ensure the offer is legit and viable. You can gather insights from other users of the platform or even find information from reputable review sites.

    Bottom Line

    In summary, bonds are a hugely diverse product. Not only do you get to choose from government bonds and corporate bonds, but you also get to choose how long you want to invest, and to what risk level. This opens up the doors for investors of all shapes and sizes.

    The important thing to remember is that the higher the yield, the higher the risk. As such, it is always a good idea to have a portfolio of bonds with different risk classes. You should also remember that although bonds rise and fall in value in the open marketplace, if you hold on to your bonds until they mature, then you'll always receive the same annual yield.

    Most importantly, in order to invest in bonds safely, we recommend a reputable, well-established bond broker that offers reasonable fees and a good selection of government bonds, corporate bonds, or bond ETFs.

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    Glossary of bonds terms


    A bond is when companies or governments need to generate funds and when you invest you will receive lump sump back with interest at the end of your agreement.


    Gilts refer to the bonds and debt securities issued by the UK government through the Debt Management Office. They carry fixed interest rates and are categorised among the most secure forms of investment as they are government backed thus have never failed to pay interest or repay back capital upon maturity.

    Municipal Bonds

    A Municipal Bond is usually issued by United Kingdom Municipal Bonds Agency to finance public projects initiated by the local authority such as roads, drainage, and schools. You will receive you lump sum and interest back at the end of the term.

    Corporate Bonds

    A Corporate Bond is issued by businesses to raise funds for expansions or projects. You will recieve you lump sum and interest back at the end of the term.

    Premium Bonds

    A Bond that has no interest rate but your investments are entered into prize draws to win £25 to £1mil.

    Savings Bond

    Usually offered by Banks and Building Societies, Saving Bonds will last for a fixed term and earn interest. You are not able to access the money during the fixed term.

    Fixed Rate Bonds

    A Fixed Bond will start and end with same Interest Rate.


    What is a bond?

    If you invest in bonds it means you lend money to a large corporation or government. You'll receive regular interest payments for loaning the money out, and you'll receive your original investment back at the end of the term.

    Do I need to hold on to bonds until they expire?

    It is really important that you understand this section before you make an investment into bonds. So far, we've explained how you make fixed annual returns on bonds, and that you receive your original bond payment at the end of the term. Although this is accurate, it is also important to note that the value of the bond you hold will change depending on market conditions. This is because just like traditional stocks and shares, bonds can be traded in the open marketplace with other investors. You might remember how we discussed the 100-year bond offered by the U.S. government. Well, obviously nobody is going to invest in something if they can't recoup their money before they die. The reason that investors would purchase bonds with a super long term is that they can trade them in the financial markets. For example, let's say that you bought a 10-year bond in a company that operates in the sugar industry. If the government that the company is based in decides to add a new tax on sugar, then that wouldn't be good for the company. As such, the value of the bond would go down, as the risk of the company not paying their investors back is higher.

    What is the difference between government bonds and corporate bonds?

    Apart from one being issued by a government and the other by a corporation, both operate in exactly the same way.

    What are Bond ETFs?

    Some bonds are difficult for everyday investors to purchase. This is usually the case for foreign government bonds. The reason for this is that the government stipulates a minimum purchase amount, meaning that you usually need to be an institutional investor to get a look in. In cases such as this, you might want to consider a bond ETF. Although it is frustrating not to receive interest payments, bond ETFs can be a great way to invest in a national economy that you would otherwise be unable to buy bonds in. Note: Bond ETFs do not pay investors any interest payments. Instead, you are simply speculating on whether the value of the bond will go up or down.

    Are investment bonds risky?

    Although bonds are often regarded as one of the lowest risk investments, technically, they are not risk-free. You are essentially lending money to a government or corporation, meaning that if the institution defaulted, then you might not get paid. However, in the grand scheme of things, the chances of this happening are super low. In the case of government bonds, it is almost certain that you will receive your interest payments on time, as well as your original investment back once the bonds expire. As noted above, even if the government didn't have the cash to pay you back, they'd simply print more money. However, it is important to note that some governments have previously defaulted on bond payments. Greece, for example, defaulted on a €1.6 billion payment back in 2015. However, the country has since met all of its debt obligations. In the case of corporate bonds, it is significantly more likely that a company will default on its bond obligations in comparison to a government. Large companies run into financial difficulties all of the time. Back in 2008 when the financial crisis began to loom, the likes of RBS, Lloyds, Northern Rock, and Bradford & Bingley had to be bailed out by the UK government. Companies in the U.S., such as the Lehman Brothers, weren't so lucky. This is why bond prices fluctuate in the open market. However, if you hold on to your bonds until they expire, and the corporation or government meets all of their payments, you'll receive the same yield throughout the agreement.

    Are government bonds risk-free?

    Technically, no investment is risk-free, no matter what asset you are holding. However, certain bond investments, such as UK or U.S. government bonds, would only lose you money if the government no longer existed. On the other hand, some government bonds are a lot more risky, especially those from emerging markets.

    What yields do bonds pay?

    The yield attached to a bond will depend on the risk level and the duration of the bond agreement. Super low-risk bonds that mature in 1 year will typically pay less than 1%. However, buying long-term government bonds issued by Turkey can pay as much as 20%.

    Can I sell my bonds before they mature?

    If you are purchasing bonds that are highly liquid (such as U.S. or UK government bonds, or corporate bonds issued by blue-chip companies), then you can trade them on the secondary market. However, depending on economic circumstances, you might have to sell them for less than what you paid.

    How can I invest in foreign government bonds?

    Unless you are an institutional investor, some government bonds are really difficult to obtain. Unless you are looking to invest significant amounts, then you might need to consider CFDs or an ETF.

    What are property bonds?

    Property bonds operate in a very similar way to traditional bonds. In most cases, instead of lending money to a blue-chip corporation or a government, you lend money to a property developer. They use this money to fund their construction projects. You'll receive fixed interest payments, and your lump sum is repaid at the end of the term.

    UK Bonds - A-Z Directory

    UK Bonds - directory


    Kane Pepi

    Kane holds academic qualifications in the finance and financial investigation fields. With a passion for all-things finance, he currently writes for a number of online publications.