Long term savings accounts

If you’ve set a long-term savings goal or recently received a lump sum of money you want to invest, then a long term savings account could be the ideal option for you.

Long term savings accounts – also known as fixed rate bonds – allow you to lock in your money for a set period in return for a competitive interest rate. So if you want a risk-free way to grow your savings, look no further.

A long term savings account lets you lock in your money for a specified period, during which time you’ll receive a fixed rate of interest. You may have also heard them referred to as fixed rate bonds, lump sum accounts or fixed rate savings accounts.

The length of the term can vary from six months to five years, but accounts with longer terms typically offer the highest interest rates. The best long term savings account for you will depend on your individual savings goals and circumstances.

Long term savings accounts are relatively straightforward. To open an account you will need a lump sum deposit that you’ll agree with your provider when you apply. The minimum deposit required is typically between £500 and £1,000, while the maximum deposit can be as much as £2,000,000.

Once your money is safely locked away you can relax while it accrues the set rate of interest over the agreed term. When your account ‘matures’ and the term ends, you can either withdraw your money, renew your account or reinvest your savings into a different account.

It’s important to remember that you won’t be able to withdraw money from the account for the duration of the agreed term or, if you do, there may be significant financial penalties. In addition, you won’t be able to add to your savings until the account matures; the initial deposit is normally the only time you will pay into the account. You should therefore think carefully when choosing the length of the term and the amount you wish to deposit.

If you’re looking for more flexibility, a notice account, ISA or easy access savings account may be a better option.

The length of time you choose to invest your money depends on your financial goals and whether you may need access to your savings during the agreed term. Typical terms can last for one year, two years, three years or five years, although they can be as short as six months.

At Raisin UK we offer five main types of long term savings accounts, although other terms are also available:

• 6 Month Fixed Rate Bonds – these have the shortest term and, as a result, usually offer lower rates of interest than accounts with longer fixed terms (although the rates still tend to be more competitive than easy access savings accounts).
• 1 Year Fixed Rate Bonds – this type of long term savings account may be ideal if you want to secure a competitive rate of interest and are confident you won’t need to access your money for a year.
• 2 Year Fixed Rate Bonds – this is one of the most popular long term savings accounts as it allows you to grow your savings pot on a fairly short yet manageable timescale.
• 3 Year Fixed Rate Bonds – if you can stretch to three years, this type of account typically offers higher rates of interest than one and two year long term savings accounts.
• 5 Year Fixed Rate Bonds – five year long term savings accounts usually deliver the biggest returns and are ideal if you have a lump sum of money that you’re happy to lock away over a longer period.

Yes, it is possible to have more than one long term savings account. In fact, owning multiple long term savings accounts with different terms can be a good way to structure your savings portfolio (providing you won’t need access to the cash before the term ends).

The interest you receive from a long term savings account is shown as an annual equivalent rate (AER). The AER indicates how much interest you’ll earn over a full year after taking into account the effect of compounding, bonuses and charges. The AER calculation makes it easier to compare savings accounts from providers with different terms.

How much interest you’ll earn from a long term savings account depends on:

• The length of your fixed term
• Your deposit amount
• The interest rate (AER)
• How your bank calculates interest

You should also consider whether you’ll need to pay tax on any interest you receive. Most UK taxpayers can earn interest on savings up to set amounts without paying tax, although the rules are more stringent for higher earners.

The amount of tax you have to pay depends on how much interest you earn over the year and what income tax band you’re in.

Thanks to the personal savings allowance, in 2024/25, basic rate taxpayers can earn up to £1,000 in interest without paying tax, while higher rate taxpayers can earn up to £500 of tax-free interest. Any interest above these limits will be taxed at your usual rate of income tax – so 20% for basic rate taxpayers and 40% for higher rate taxpayers.

As an additional rate (45%) taxpayer, you do not receive a personal savings allowance, which means all interest is taxed at 45%.

Yes. Under the Financial Services Compensation Scheme (FSCS), savings held in a UK regulated bank are protected up to £85,000 per eligible person, per banking group. This amount doubles to £170,000 if you own a joint account.

At Raisin UK, we only allow you to deposit up to this maximum amount, so you can be confident that your money is secure.

It’s also worth remembering that long term savings accounts provide a low-risk alternative to other investment options such as stocks and shares. With a long term savings account, you’re guaranteed to receive your original deposit back with any interest you’ve earned.

A long term savings account has a number of benefits, including:

• Guaranteed savings growth – your interest rate won’t change so your savings pot is guaranteed to grow. Plus you’ll know exactly how much you’ll receive at the end of the term.
• Complete protection – the long term savings accounts in the Raisin UK marketplace include deposit protection under the FSCS, so you’ll have peace of mind that your savings are secure.
• Higher interest rates – locking your money away for longer means you can benefit from higher interest rates without putting your savings at risk.
• Removes temptation to spend – investing your money in a long term savings account means you can’t spend your deposit.

What’s more, it’s free to open a long term savings account from the Raisin UK marketplace, and you can easily manage your savings online.

Finding the best long term savings account for you will depend on your individual circumstances. It’s a good idea to review your budget and financial situation so you know exactly how much you can afford to lock away and for how long.

Before choosing an account, ask yourself the following questions:

• Can I afford to lock away a lump sum of money?
• How much can I realistically put into a long term savings account?
• What length of term am I comfortable with?
• Do I have another source of savings I can call upon if required e.g. an emergency fund?
• Is there a chance I will need to access the funds before the end of the term?

If you’re happy to leave your money untouched for a significant period of time, a three or five year fixed rate bond may be a good choice. However, if there’s a chance you’ll need to withdraw the money before the account matures, or you don’t have other savings you can access, it may be wise to look at shorter term options or notice accounts.

The best way to find a long term savings account that’s right for you is to compare the different accounts available on the market.

Currently, the highest rate of interest you can earn from a fixed rate bond through our marketplace is 4.60% AER for a five year term, while the highest paying six month account is offering 5.52% AER.

Whatever long term savings account you choose, it’s best to do your research to ensure you get the best possible return over a term that suits you.

Opening a long term savings account with Raisin UK is easy. Simply register for a Raisin UK account (it’s free) and, once you’re approved, log in and apply for your chosen fixed rate bond from our marketplace.

Make sure you’re happy with the details and have read the terms and conditions before transferring the deposit into your Raisin UK account. You don’t have to transfer the whole deposit in one go, although you must transfer the full amount within the funding window (usually 60 days). Then it’s time to sit back and watch your money grow.

You can find more information on how to apply in our guide to opening a fixed rate bond.