Would You Tie Up Your Savings for Five Years?

Written by Karen Bryan

£2 coins on top1 Leeds Building Society’s Five Year No Access Bond (Issue 2) pays 3.05%, with a minimum opening deposit of £100.  Skipton Building Society are offering 3% on their Fixed Rate 3 Year E-Bond, with a minimum opening deposit of £500.

There’s no access allowed on either of these accounts until the date of maturity.

Am I tempted by earning 3% per year for tying up savings for five years? Not really. I’m hoping that interest rates will start to increase within the next 2-3 years. As I’d pay 20% basic rate income tax on the 3% interest, I’d end up with a return of around 2.4%, which is below the current rate of inflation.

I might be slightly tempted by the Leeds Building Society’s Five Year Access ISA (Issue 2), which pays a tax free 2.9% fixed rate of interest but allows access to 25% of the original investment.

Updated on 27 September 2013.