The difference between a fixed rate savings account and a bond.

sweetsand

Hi
We are looking at moving all of our cash from NS&! other than the premium bonds to some fixed rate account.
What is the difference between a bond and a saving account, fixed rate?
IWe aim for a uk based, we known firm that is on the financial comp scheme and guaranteed fixed rate payments and
not the shira type accounts where the rates, even fixed ones can vary subject to their profits is my understanding.

Main question, fixed rate bonds V fixed rate saving the diffference, please

Many thanks.
x

eskbanker

"Bond" can be used to mean exactly the same as a (protected) savings account, but is also widely used to mean other types of product, with less, if any, protection, so it's all about context.  The latter usually offer higher rates, often concealing risks, which one(s) are you looking at?

cattie

You probably would need to read the small print as personally I don't think there's any difference if any. I hold both types of accounts.

The only thing that springs to mind is that a bond cannot be cashed in prior to the term end, but perhaps with fixed savings it might  be possible to make a withdrawal before end of term. But as mentioned, the terms & conditions need to be read before commitment if you feel there's a chance you'll need a withdrawal before funds mature.

sweetsand

eskbanker said:

"Bond" can be used to mean exactly the same as a (protected) savings account, but is also widely used to mean other types of product, with less, if any, protection, so it's all about context.  The latter usually offer higher rates, often concealing risks, which one(s) are you looking at?

Many thanks for the speedy response.
We have had bonds in the past and most recently up until about 7/9 months ago Charter fixed rate bonds.
We are not looking at any risk and this is why I am always worried a little when going for fixed rate bonds
and these bonds are actually just like savings in a buildign society but fixed rate, guranteed return. I have noted as you said, many bonds offer higher rate and by a lot at times but the risks are there.


So, us buying certain Bonds guarantees us fixed rate returns? If so, why are the called Bonds, please?

TIA

sweetsand

cattie said:

You probably would need to read the small print as personally I don't think there's any difference if any. I hold both types of accounts.

The only thing that springs to mind is that a bond cannot be cashed in prior to the term end, but perhaps with fixed savings it might  be possible to make a withdrawal before end of term. But as mentioned, the terms & conditions need to be read before commitment if you feel there's a chance you'll need a withdrawal before funds mature.

Thank you - I was posting the above post when you posted yous. Makes sense, thanks again

Albermarle

A fixed rate savings account , for a fixed period, is a clear description of the product you are looking for .Some fixed rate savings accounts also call themselves fixed rate bonds. There is no difference , although each institution will have their own rules about withdrawal penalties etc. 
'Bond' is a multi purpose word that is applied to many different products , most of them not actually savings accounts .
If the institution offering the fixed rate saving bond is FSCS covered and appears in well known comparison sites , like Moneyfacts or money supermarket , then you are OK .
If you are offered a bond by some unknown institution with a high interest rate , then it is probably a scam/dodgy.

Linton

In investing, a bond is an interest bearing loan with a legal requirement for it to be repaid usually at a particular time, but it could be never or at the issuer's discretion. When the government or a company wishes to raise a loan from the financial markets it will issue bonds with an interest rate as a % of the initial loan and maturity (repayment) conditions specified. Once a bond has been bought it can be resold retaining the legal rights.  However the interest and the amount to repaid both remain fixed in cash terms.  Index linked bonds add a bit more complication whereby the amount to be repaid increases in line with a specified index.  In the UK an individual bond is normally issued at £100.

Banks misuse the term "bond" to refer to fixed rate savings accounts, which are not loans in the legal sense.

macman

Your concern about sharia account fixed rate interest levels is unfounded: there's not, AFAIK, a single UK sharia account that has ever failed to pay out the 'expected profit level' advertised. They're just not allowed to use the 'i' word.

eskbanker

macman said:

Your concern about sharia account fixed rate interest levels is unfounded: there's not, AFAIK, a single UK sharia account that has ever failed to pay out the 'expected profit level' advertised. They're just not allowed to use the 'i' word.

There's an example of shortfalls given at https://forums.moneysavingexpert.com/discussion/comment/76267662#Comment_76267662, although that was quite a long time ago....

sweetsand

eskbanker said:

macman said:

Your concern about sharia account fixed rate interest levels is unfounded: there's not, AFAIK, a single UK sharia account that has ever failed to pay out the 'expected profit level' advertised. They're just not allowed to use the 'i' word.

There's an example of shortfalls given at https://forums.moneysavingexpert.com/discussion/comment/76267662#Comment_76267662, although that was quite a long time ago....

Thank you I was going to give the poster some examples but you beat me to it.
It was actually this the MSE alerted me to the possibility of not getting the advertised rate so not for us.
Thanks

eskbanker

sweetsand said:

eskbanker said:

macman said:

Your concern about sharia account fixed rate interest levels is unfounded: there's not, AFAIK, a single UK sharia account that has ever failed to pay out the 'expected profit level' advertised. They're just not allowed to use the 'i' word.

There's an example of shortfalls given at https://forums.moneysavingexpert.com/discussion/comment/76267662#Comment_76267662, although that was quite a long time ago....

Thank you I was going to give the poster some examples but you beat me to it.
It was actually this the MSE alerted me to the possibility of not getting the advertised rate so not for us.
Thanks

Don't let me stop you from giving more examples, so carry on and post them, especially if you have some more recent ones than 2008!