What is a Bond??

rainbow143

I am looking for somewhere to invest savings of £85000.
I have looked at the Post Office Online Fixed Bonds.
I have always associated Bonds with investments - so just need some confirmation that these PO Bonds are just savings accounts and there is no risk to my initial deposit.
Can anyone advise please? Many thanks.

Ifts

A Savings bond (also known as term deposit) is the same as savings accounts when it comes to the £85k FSCS protection, there is no risk to your money up to the FSCS limit.

Savings bond - http://www.moneysupermarket.com/savings/guide-to-the-best-savings-bonds/

Fixed rate bond best buys: http://moneyfacts.co.uk/savings/fixed-rate-bonds/

Linton

Banks frequently and incorrectly call their fixed rate/term savings accounts "Bonds". The PO Online Bond is an example of this.

thenudeone

The proper usage of "Bond" is when you effectively invest by lending a company money, which entitles you to interest and the return of the money at some point well into the future (determined by the terms of the bond). If the company becomes insolvent you probably may not get any money back.

Banks and Building societies have misused it because the word bond can also be used to denote a contract, trust, and security, as in: "my word is my bond"

But a fixed rate "bond" marketed on the high street by a bank or BS is completely different to a legal bond, and is just a re-named fixed-term savings account, protected by the FSCS

dunstonh

There are also investment bonds which are investments in life funds (also a misname but going back much further in time). Corporate bonds or other fixed interest bonds). None of which have anything in common with fixed term deposits (incorrectly called bonds as already mentioned).

calypso_rhapsody

If you are looking to save £85k for a longish period and want to have the comfort of full FSCS guarantee you really need to split it (or have it in a joint account) and any interest on the £85k would not be covered in a sole account with one institution.

Reaper

thenudeone wrote: »

The proper usage of "Bond" is when you effectively invest by lending a company money

Or government. If you lend money to the UK government the bonds are commonly known as "gilts" or "gilt edged". So called because the bond certificates used to be gilt edged.

The principle is the same. They repay a fixed interest until the end of the term when you get your capital back, or pay forever if there is no redemption date.