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19 Sep 2018

Barclays new 'flexible' fixed-rate savings bond: how does it measure up?

Unique bond offers a fixed-rate with access to some of your cash

Barclays has launched a three-year fixed-rate bond with a twist - you'll earn income for the full period, but can access some of your investment each month.

The account combines the security of a fixed-rate bond with the flexibility to withdraw your money. However, the interest rate isn't market-leading and you are only able to unlock a small proportion of your investment.

Which? takes a closer look at how the account works, and how it compares against other products in the market.

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How the Barclays bond works

The Barclays Flexible Bond pays 1.8% AER fixed for three years on balances from £1 up to £1m. You're also able to make one withdrawal a month without penalty.

However, the maximum value of the withdrawal is set at 3% of your initial deposit. So if you put in £10,000, you will only be able to take out £300 a month.

Interest is paid monthly on your balance into a nominated account, but bear in mind taking money out of the bond will reduce the amount of interest you earn. You won't be able to make additional deposits into the bond during the period.

There are no restrictions on taking out more than one bond, but Barclays says the deal is a limited issue product so it could be pulled at any time.

Is the Barclays bond right for you?

Barclays says the deal is aimed at savers nearing retirement - but anyone over the age of 18 can open an account.

This product may appeal to anyone who wants to generate a monthly income at a fixed-rate, but also have access to some additional cash for unexpected costs.

For example, if you deposited £85,000 into the account, you could earn £127.50 a month in interest, and you could unlock up to £2,550 if you needed it.

However, making this withdrawal would mean you would have £82,450 left in the account, which means the monthly income you earn will fall to £123.68.

The rate offered also isn't market-leading, meaning you may be able to earn higher returns by keeping your money in a different account.

How the Barclays bond compares

If you're prepared to leave your money untouched for three full years, you could earn more interest with other products.

Right now you can earn a rate of 2.41% AER with Charter Savings Bank on deposits from £1,000 - 0.61% more than the Barclays Flexible Bond.

You can compare market-leading three-year fixed-rate bonds with Which? Money Compare below.

AccountInterest rate (AER)Minimum depositMaximum depositInterest paid
Charter Savings Bank Three-Year Fixed-Rate Bond2.41%£1,000£250,000Monthly
My Community Bank 36-month Fixed-Term Deposit
2.40%£1,000£50,000Maturity
Tandem Bank Limited Three-Year Fixed-Rate2.40%£1,000£2.5mAnniversary

*Only available to savers in certain locations and professions

Source:Which? Money Compare

What other savings options do I have?

Most instant-access accounts pay well-below the Barclays rate of 1.8%, though you would have access to your cash at any time.

It's important to make sure your savings are earning a rate that matches or beats inflation to ensure your pot doesn't lose value in real terms - andinflation is currently at 2.7%.

If you want to earn income while retaining some flexibility, you could instead consider splitting up your savings - keeping some in an easy access account for emergencies and the rest where it could be earning a better rate.

Below, we've picked out the best savings accounts across a range of easy access and fixed-rate bonds that pay monthly interest which could help you achieve this.

AccountType of accountInterest rate (AER)Min/max depositInterest paid
Kent Reliance Easy Access Account Issue 30Easy access savings account1.37%£1,000 / £1mMonthly
ICICI Bank One-Year HiSAVE Fixed-Rate AccountOne-year fixed-rate bond2.02%£1,000 / n/aMonthly
Charter Savings Bank Two-Year Fixed-Rate bondTwo-year fixed-rate bond2.24%£1,000 / £250,000Monthly
Charter Savings Bank Three-Year Fixed-Rate BondThree-year fixed-rate bond2.41%£1,000 / £250,000Monthly
Vanquis Bank Savings Four-year Fixed-Rate BondFour-year fixed-rate bond2.52%£1,000 / £250,000Monthly
Charter Savings bank Five-Year Fixed-Rate BondFive-year fixed-rate bond2.70%£1,000 / £250,000Monthly

Source: Which? Money Compare

You can compare easy-access and fixed-rate savings accounts using Which? Money Compare.

Please note that the information in this article is for information purposes only and does not constitute advice. Please refer to the particular terms & conditions of the savings account provider before committing to any financial products.

Which? Limited is an Introducer Appointed Representative of Which? Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.