Best Fixed Rate Bonds for the Over 50s

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Published: 26th June 2015
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For many people the 50s and beyond are years in which financial priorities change as debts are paid off or approaching being paid off, and there is often more money to save than there has been for decades. It is also important at these times to ensure money is saved towards a comfortable retirement, and to make sure the money you do have is working as hard as it can for you.

There are many types of savings accounts, some designed specially for the over 50s or over 60s, and in some cases the best type of savings product is a fixed rate bond, because the interest rate is higher than for accounts in which funds are easily accessible. Other options include variable rate accounts, which offer lower interest but greater access to the funds if the need arises.

There are special accounts created just for the over-50s market, and it is tempting to assume that because a banking product is designed specifically for the market it will be the best available for people over 50, but this is not always the case, as a look at the available fixed rate bonds via one of the comparison websites will make clear.

For example, in 2012, Moneyfacts.co.uk made such a comparison and found that the best one-year fixed rate bond specifically for the over 50s was offered by Northern Bank (for its existing customers only) at an interest rate of 2.25%, whereas the best one-year rate open to anyone was the State Bank of India's at 3.30%. Similarly, for the two-year bond the best for the over 50s was SAGA at 3.10%, which was lower than the State Bank of India's rate of 3.50%. (Figures valid in October 2012, and based on 10,000 in savings.)

It is always worthwhile to shop around to make sure you are getting the most for your money, and fortunately the comparison websites now make it easier than ever to compare interest rates and the conditions applying to each type of account. In many cases you can even apply online from the site. Two such sites are Money.co.uk and MoneySupermarket.com, but there are several others.

It is also important to decide what type of account is best for you. Current accounts and ISAs (individual savings accounts) offer a great deal of flexibility, but a fixed rate bond delivers a higher interest and is a great choice if you want to lock money away for use in your retirement and want to avoid the temptation of 'dipping' into your savings. The best option for many people in the over 50s age group is a mix of investments some in easy-to-access but low interest accounts, and some locked away in a fixed rate bond.

Consider all the conditions of each type of account before signing up, and with the bond, look at the restrictions applying. For example, most fixed rate bonds do not allow any withdrawals or extra deposits during the term of the bond. Others allow you to access the money only by closing the account altogether and losing all, or a substantial amount, of interest.

The length of the term is also an important consideration, and can be a bit of a gamble. Longer term investments pay higher interest rates, but with rates at historically low levels at present, there is probably a good chance that in five years' time interest rates will be higher, and if you have money locked in a five-year fixed rate bond, you may end up with less than if you had taken a two-year or three-year bond instead.

Another factor that differs from one financial institution to another is the way the interest is paid. If you are wanting to lock your money into a high-interest fixed rate bond for a few years, interest paid annually may be best. You may or may not be able to add the interest to the funds deposited in the bond.

Finding the best fixed rate bond and the best mix of investments for people over 50 is an important task because the rates of return are low at the moment, and maximising the interest you receive is vital. You can use comparison websites to research the options available, but it may also be in your interest to seek the advice of a professional financial advisor.

Author Sam Jones recommends that more information on fixed rate bonds can be found at http://www.uswitch.com/savings-isa/fixed-rate-bonds/ on price comparison website uSwitch

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