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The six best short-term bonds on the market

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Written by: Paloma Kubiak
31/03/2017
If you’re looking for the best returns on your cash but you don’t want to lock away your money for too long, here are the top short-term bonds available.

Savers looking for a bit of extra security but not wanting a long-term commitment could consider short-term bonds.

Moneyfacts data shows that fixed bond rates have been edging up in recent weeks and 18-month bonds actually pay more than their two-year counterparts.

However, it’s important savers are aware of the restrictions of these kind of savings products as many won’t let you make further additions and earlier access, if allowed, could incur hefty penalties.

But if you’ve got a lump sum to invest, here are the top short-term bonds (12-18 months) currently on the market:

BLME: 18-month bond paying an expected profit rate of 1.55% AER.

Moneyfacts said this product is the market-leader for its term, provided you’re willing to tie up your money for 18 months. It’s a Sharia compliant account which means it pays an expected profit rate of 1.55% AER, rather than a guaranteed rate. It doesn’t permit further additions or withdrawals, and you’ll need a hefty minimum investment of £25,000 as well as a BLME-linked current account.

The Family Building Society: 18-month bond paying 1.52% AER

The minimum investment is £10,000 to get the 1.52% AER and it can be opened online, by post or in branch. It doesn’t allow early access and further additions aren’t permitted either.

Paragon Bank: one-year fixed rate bond paying 1.51% AER

This is an online-only deal that pays 1.51% on a lower minimum investment of £1,000, and although the full one-year term must always be served, it offers the chance for further additions to be made for a limited period.

Atom Bank, Ikano Bank and BLME: one-year fixed rate paying 1.50% AER

Mobile-only Atom Bank pays 1.50% AER on a minimum £50 deposit and it allows further additions to be made up to a week after opening the account. However withdrawals and early access isn’t permitted.

Ikano Bank’s offering of 1.50% AER on its one-year bond is on a minimum £1,000 investment. The account can only be opened and operated online and it doesn’t allow withdrawals or early access. Swedish Ikano Bank comes under the protection of its own country’s compensation scheme, protecting savers on up to €100,000. See YourMoney.com’s ‘Should I entrust foreign banks with my savings?’ for more information.

BLME’s second bond makes the charts, this time with the 12-month version of the Premier Deposit Account. This Sharia compliant account pays an expected profit rate of 1.50% AER on a minimum investment of £25,000, with all other features mirroring those of its 18-month counterpart.

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