What should you look for in a fixed rate savings account?
The first thing to do when you compare fixed rate savings accounts is find the right balance between interest rate and term length. Usually, if you’re willing to leave your money for a longer term, you’ll get a higher rate of interest on your fixed term savings. But make sure you won’t need the money during the term, or you could lose out. Pick the balance that’s right for you.
Another factor is account management, if you have a particular preference for online or in-branch access – though this is less important with fixed term savings than it is with instant access accounts. You won’t need to do much management until the end of the term.
Some fixed rate accounts will also specify a minimum or maximum deposit – so if you want a place to store a large amount of money, you need to be aware of that. Though if you put more than £85,000 in a single bank or building society, then any money over the limit won’t be protected by the Financial Services Compensation Scheme (FSCS) or its equivalent for some EU-registered banks if the bank or building society goes bust.
You need to be careful as the amount is set per financial institution and some financial groups might count as one – for example Lloyds, Halifax and Bank of Scotland count as one institution, as do HSBC and First Direct whereas RBS and NatWest count as two.
If you choose to save using a foreign-owned bank, you should make sure you understand how your money is kept safe. For example, Santander is Spanish owned but is UK regulated so is part of the FSCS. Other European banks, such as RCI Bank and Fidor Bank, may protect you under what’s known as the passport scheme, where your money is protected under the bank's home country's protection scheme. This, of course, may change after Brexit.
Other international banks owned outside the EU have to be part of the UK scheme to operate here.