Savings Watch: FirstSave five-year Fixed-Rate bond
FirstSave's five-year Fixed-Rate bond monthly interest 2nd Issue is currently the second best five-year saving bond available, offering a rate of 2.9% AER. The highest is currently Virgin Money's Fixed-Rate E-bond (Issue 43).
To open the account you will need a minimum deposit of £5,000, and this can be done online. If you are thinking about opening this account, make sure you don't need access to your money, as no withdrawals are allowed until the product matures after five years.
But, of course, the advantage of a fixed-rate account is that because you are putting your money into a longer-term investment, you get a better rate than you would on an instant-access account.You also know what return you will get on your cash.
Sitting just behind the First Save bond in the best buy tables on moneywise.co.uk/compare is Shawbrook Bank with its own five-year fixed-rate bond, which offers a rate of 2.75% AER. It can be opened online or by post, with a minimum deposit of £5,000.
For further details of both accounts, see firstsave.co.uk and shawbrook.co.uk.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.
Where APR is the rate charged for money borrowed, Annual equivalent rate is how interest is calculated on money saved. The AER takes into account the frequency the product pays interest and how that interest compounds. So, if two savings products pay the same rate of interest but one pays interest more frequently, that account compounds the interest more frequently and will have a higher AER.