What happens when a fixed-rate bond matures?

When a fixed-rate bond matures, the banking provider will allow a customer to either withdraw some or all of their savings into another nominated account of their choosing or roll their savings over into another account. Should a customer not decide before the bond matures, the provider will usually automatically transfer the savings into an easy access holding account in which they’ll stay until a decision is made.

How should you compare fixed-term bond rates?

Comparing fixed-term bond rates can generally be best guided by reviewing both the rate and fixed term to find a product that best suits your financial needs. For example, the highest savings rates are usually packaged with the longest fixed terms, sometimes as high as five years, however you may personally need access to your savings sooner than that.

As a result, comparing fixed-term bond rates isn’t always as simple as reviewing the most competitive interest levels. It can be just as beneficial to balance term length against each available interest rate in order to find an account that both offers a competitive interest rate and gives you access to your savings when you’ll need them in future.

What access will you have during the term?

Most fixed-rate bonds will grant a few days’ grace period after the initial lump sum deposit, after which the bond will lock in, and you’ll then not be able to access your savings again until bond maturity. As a result, both withdrawals and further deposits into the account during this fixed window are not possible.

While savers have no given right to withdraw their funds prior to maturity, the banking provider does reserve the discretionary right to grant an early withdrawal in the case of exceptional circumstances. Be aware that even if a bank does approve an early withdrawal, this can come with financial fees or interest penalties given it’s a break in the fixed bond contract.

What happens at the end of the fixed term?

A banking provider will generally contact you two to four weeks before bond maturity to ask what you’d like to do with your money, as a few options exist. You can either withdraw some or all of your funds into a nominated account of your choosing or pre-select a new account that your savings will automatically roll over into once they reach maturity.

If you don’t make a decision by the time the bond matures, your provider will usually automatically roll your savings over into an easy access savings account.

Should you chase the highest rate?

Chasing the highest interest rate isn’t always the most beneficial path, depending on your personal financial needs and especially future plans. The highest rates on fixed-rate bonds are usually tied to the longest term lengths, ranging up to a general maximum of 5 years.

While these long-term fixes with high rates can appear attractive, it can be worth keeping in mind that the general market rates can change over time and there is no guarantee that base rates would not increase beyond what might have been fixed a few years ago. As a result, paying attention to the term length which best suits you can often be just as beneficial as focusing on achieving a competitive interest rate.

What happens when a fixed-rate bond matures?

To summarise:

• A banking provider will usually notify the account holder a few weeks before their fixed-rate bond is set to mature.
• A saver will have the option to withdraw some or all of their funds into a nominated account of their choosing, or to roll it over directly into another account or fixed-term bond with that provider.
• If the customer doesn’t make a decision by bond maturity, then the provider will usually automatically transfer their funds into an easy access holding account where the same choices can easily be made.
• Fixed-rate bonds don’t allow withdrawals or deposits for the duration of their term, however in some exceptional circumstances a provider reserves the discretionary right to approve early account access or closure. This early access can however incur a financial fee or interest penalty.
• When selecting a fixed-rate bond, it can be just as beneficial to review the term length as the interest rate to choose the most suitable account for your financial future.

Frequently asked questions

What happens when a fixed-rate bond reaches maturity?

You’ll have the option to withdraw your money by transferring it to a nominated savings account, or to roll it over into a new account with the same provider. If you don’t make a choice before bond maturity, your provider may automatically roll your savings over into an easy access holding account.

Does the highest savings rate always mean the best account?

The highest savings rates are usually tied to the longest fixed terms, sometimes as much as five years, and these long-term bonds are not always suitable for every kind of saver. If you need to access your money sooner, then the account with the highest rate might not always be the best for you.

Are savings protected by the FSCS?

Eligible individuals can have up to £120,000 of savings protected by the FSCS per banking provider. If you’re considering saving more than this amount in one place, then it’s worth understanding the limits of that protection.

Can savings rates change?

Many savings accounts are governed by variable interest rates, meaning that their rates can both decrease and increase over time. Fixed-rate bonds offer a consistent interest rate for the entire duration of the agreed term, however this doesn’t guarantee that market rates could rise beyond the fixed level as time goes on.

Where can I check current tax or ISA rules?

You can review current and planned tax or ISA rules on the gov website.

How often should I review my savings?

It can be beneficial to review your savings every three to six months, though given limited access to money in a fixed-rate bond this timescale can be longer depending on how long you fix your money for. Regardless, it can still be helpful to keep an eye on market rates, and your own future savings plans every six months at least.

Next steps

If you’re looking for further helpful information on what happens when a fixed-rate bond matures, please find the following:

View Fixed-rate bonds

Best fixed rate savings

Fixed rate bond maturity