Should you lock up your savings in a ten year bond?Leeds Building Society account offers 4% rate
25 July 2014
Leeds Building Society is offering a market-leading rate of 4% on its new ten-year bond. But with interest rate rises thought to be around the corner, is such a long-term investment a good idea?
Here's a look at the pros and cons of long-term savings accounts - and the alternatives.
Fixed-rate accounts of five years or more
Leeds Building Society's offer is the longest fixed rate savings account on the market. FirstSave and Secure Trust Bank also offer bonds of longer than five years, with Secure Trust Bank guaranteeing a return of 3.52% over seven years.
Like the Leeds Building Society account, there's no option to withdraw money early, so you'll need to be confident you can commit to it from the start.
If you'd prefer to sign up for a shorter term, you'll find rates of up to 3.25% on five-year savings accounts and 2.75% on three-year savings accounts - see our best rate tables for more.
Go further: Best rate savings accounts - see how fixed rate savings accounts of up to five years compare
Interest rate rises around the corner?
The Bank of England is widely expected to raise interest rates over the next few years. If your savings are locked up in a seven or ten-year bond when that happens, you could end up missing out on a better deal.
If you want to guarantee your savings income for the next decade right now, Leeds Building Society's ten-year bond offers the highest interest rate available. But it could be worth considering one of the shorter-term deals on the market and switching account in a few years' time.
Go further: Scrap the Savings Trap - support our campaign to help savers get a good deal
Tax-free Isas might be a better deal
If you're after a low-risk savings account, you should also bear a cash Isa in mind.
Although the rates are generally lower than other savings accounts, this is compensated by the fact that you won't pay any tax on the interest. For example, the best five-year cash Isa rates of 2.85% could earn you as much as a 3.56% regular savings account, if you're a basic rate taxpayer.
Under the new Isa rules, you can deposit up to £15,000 a year in a cash Isa. This limit can now be made up of cash, or stocks and shares, or a mixture of both.
Go further: Best rate Isas - see how much interest you could earn tax-free
- Best rates on savings accounts - find the most generous deals
- Save in a Best Rate cash Isa - to maximise your tax-free allowance
- Call the Which? Money Helpline - expert help on your savings