6 of the best one-year bonds

Thursday, 13 November 2014
Last week’s announcement that base rate is staying at 0.5% for a further month won’t have been welcome news to savers, but perhaps even worse was the indication that it’ll stay at this record low level well into next year. The Bank of England has predicted that inflation could fall below 1% in the next six months, so there’ll be no need to increase rates for the foreseeable future – which means banks won’t have an incentive to bring their rates out of the abyss, either.

Can rates get much lower?
The truth of the matter is, we just don’t know. Banks simply don’t need our cash, a hangover of the Funding for Lending Scheme (FLS), which gave them access to cheap funds that they could lend out to consumers and businesses. Despite the scheme having been withdrawn from the residential sector, a lot of banks still have reserves stashed away – which means they don’t need our savings to balance the books.

The silver lining
Add to that the low bank rate and equally low inflation levels, and banks arguably won’t be raising rates any time soon. But, there is a silver lining. One positive impact of all this is that, thanks to inflation being so low, there are more savings accounts that can beat it – and if it falls even lower, there’ll be even more. That means you can stash your money away and won’t see its value reduce over time, giving you real returns that can give your savings a welcome boost.

Get real returns from a one-year bond
In even better news, you don’t need to tie your money up for years to get those kinds of returns – even a one-year bond can do the job! The perfect place to stash your cash if you’ve got a short-term savings goal, these accounts mean you won’t be tempted to dip into your pot for non-essential spending, and they could be a great way to make sure you’re prepared for next year’s Christmas shopping.

So, I thought I’d help you find the right account for your needs by giving a quick overview of the top six one-year fixed rate bonds currently available. All of them pay over the 1.50% needed to secure an inflation and taxman-beating return, and any one of them could be perfect for your needs. Let’s take a look.

Top one-year bonds
Taking the top spot is this one-year bond from Kent Reliance, paying 1.90% from a minimum investment of £1,000. This branch and postal-operated account can be opened online, and it also allows earlier access to funds should the need arise – subject to a 180-day loss of interest penalty – offering savers some welcome flexibility.
AER Notice/Term Minimum Investment Account Opening

1 year fixed rate bond Issue 27
1.90% 1 Year Bond £1000
  • Online
  • Branch
  • Postal
Another 12-month bond boasting a rate of 1.90%, this account from the Islamic Bank of Britain can again be opened with a minimum investment of £1,000. It can be managed via all channels for the height of convenience, but – a common feature in the short-term market – it doesn’t allow further additions or earlier access to funds, so savers will need to be comfortable with the one-year commitment.
AER Notice/Term Minimum Investment Account Opening

Fixed Term Deposit
1.90% 12 Month Bond £1000
  • Online
  • Branch
  • Postal
  • Phone
Up next is this account from Post Office, offering 1.80% from a minimum investment of £500. It’s a postal-operated account that can be opened in branch should you wish, but bear in mind that further additions and withdrawals won’t be permitted.
AER Notice/Term Minimum Investment Account Opening

Growth Bond Issue 23
1.80% 1 Year Bond £500
  • Branch
  • Postal
The ideal account for the internet saver with a significant amount to invest, this one-year account from State Bank of India pays 1.80% from a minimum deposit of £10,000. Although it can only be opened online, it can also be managed in branch should online management not appeal, but savers will again need to be comfortable with locking their money away as earlier access isn’t allowed.
AER Notice/Term Minimum Investment Account Opening

Online 1 Year Fixed Term Deposit
1.80% 1 Year Bond £10000
  • Online
This account from Aldermore boasts a rate of 1.75% from a minimum investment of £1,000. It doesn’t allow further additions or earlier access but can be managed online, by post or by phone, making it a convenient option for savers who are happy with their initial deposit and chosen term.
AER Notice/Term Minimum Investment Account Opening

1 Year Fixed Rate Account
1.75% 1 Year Bond £1000
  • Online
  • Postal
  • Phone
Finally, this account from Axis Bank offers tiered rates of interest depending on the balance, starting at 1.55% for a £10,000 investment and rising to 1.70% at £50,000. It can be managed by post or in branch, pays interest on the anniversary of the account opening and doesn’t allow earlier access to funds, helping you to meet your savings goal by keeping your cash tied up.
AER Notice/Term Minimum Investment Account Opening

Fixed Deposit Account
1.70% 1 Year Bond £50000
  • Branch
  • Postal