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Should you lock-up your savings for seven years?

Market leading fixed savings account paying 3.52%

Piggy bank with padlock, savings safety

Savers can secure a market-leading interest rate of 3.52%, if they are willing to lock up their funds for seven years.  

Secure Trust Bank offers this rate with its new seven-year bond, but is it a good idea to keep your savings locked up for such a long period?

Here, we analyse the pros and cons of investing your funds in these long-term savings mechanisms.   

Longer fixed-rate savings account now on offer

Traditionally, fixed-rate savings accounts were only available on a one to five-year term, but this is no longer the case with seven-year deals available in the market place. 

FirstSave and Secure Trust Bank are the only providers who currently offer a bond for longer than five years. 

Secure Trust Bank’s seven-year fixed-rate bond is the market leader at 3.52%, but customers will need to be aware of the strict restrictions that apply. Savers opening this bond will be locked in for the whole seven-year term with no option to take the funds out early, so they must be confident they can commit to this long-term product from the outset. 

Go further: Best rate savings accounts – see how shorter-term fixed rate savings accounts compare 

Fixed rate savings accounts compared

Surprisingly, this bond pays just 0.42% more than that offered on the best five-year deal from Shawbrook Bank. Putting £10,000 into the bond will earn £2,740 in interest over the seven years, but if interest rates rise during the next few years, this could prove to be a poor value option compared to a shorter term deal. 

The rates paid by the two providers offering the seven-year deals are low in historical terms, so it’s still worth remembering that tying up your money for such a long period may not always be the best move. If rates start to rise before the end of the term, as we expect them to, you could miss out on more attractive offerings over the coming years. 

Go further: Scrap the savings trap – support our campaign to help savers get a better deal 

Consider other available savings models

Those on the lookout for low-risk savings products should also keep an eye on the best available Isa deals offered by lenders. 

You can deposit your savings tax-free into a cash or a stocks and shares Isa, or both. The overall allowance for Isas currently stands at £11,880 for the 2014/15 tax year. The limit for cash Isas is £5,940.

However, from 1 July 2014, the overall investment limit will be increased further to £15,000 a year, which can be made up of cash, or stocks and shares, or a mixture of both.

Consumers willing to take a bit more risk with their savings may want to consider putting money into other equities.

Go further: Which? Investment portfolios – a useful tool for those willing to take a punt on riskier investments  

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