Term and bond accounts

If you can afford to put your money away for a year or more, then a term or bond account may be your best bet.

Savings bonds, or term accounts as they are sometimes called, enable you to deposit your cash at a fixed rate of interest for a set period of time. The most well known are those issued by National Savings & Investments which is backed by the government, although building societies issue them too.

People who want a guaranteed income with minimum risk and are prepared to lock away sizeable sums of money for anything up to five years often use Savings Bonds. But while you would usually get more interest than you would get in an instant access account, the higher rates may also reflect the fact that the company providing it expects rates to rise a little over the time period in which case you'll be stuck at your fixed rate for the duration.

Many savings bonds only allow a minimum or maximum one-off lump sum to be invested at the start of the set period so you can't add to the capital, and if during the term you need access to the capital, you'll probably be subect to a penalty such as loss of interest. In some cases you may be required to close the account completely.

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