Beware fixed bond pitfalls

SAVERS pulling money out of fixed-rate bonds must beware traps that can wreck returns. In April alone, £1.88 billion flowed out of fixed-rate accounts, the largest amount for more than a year, latest figures show.

Your provider will write to you to tell you that your bond is coming to an end and spell out your options. Ignore this at your peril.

Don’t assume that it will pay simply pay the money back into your current account or send a cheque. Providers differ in what they do at the end of the term.

They want to hold on to your money and continue paying low rates. So you could end up in a poor-paying easy-access account or, even worse, in another fixed-rate bond where you can’t touch your money.

NatWest writes to you 14 days before your bond matures. If you don’t tell the bank you want to opt out, it automatically reinvests your money into a new bond.

You must tell it you want your money back before the maturity date. Once you are in the

By Sylvia Morris

new bond, you have a month to take your money out without paying a fee.

Barclays works in the same way. Your silence means you will be rolled over into a new bond. And, unlike NatWest, Barclays says you can’t take your money out of your new bond until the end of the new term.

Barclays pays just 0.9 pc fixed for a year, far less than the 1.4 pc you can earn on a similar bond in the High Street or 1.95 pc online.

You are also at risk of ending up in a new bond by default with National Savings & Investments Guaranteed Growth or Income Bonds. It writes to you around 30 days before your bond matures and again with 14 days to go. You need to tell it before the maturity date if you want your money back, or you end up in a new bond of a similar term.

You can get your money back during the new term, but at a price — equivalent to 90 days’ interest. With Yorkshire BS, your money will end up in its Fixed Rate Access Bond. Once there, you can take your money out in the first month, but after that, you pay a fee to get it out early. Coventry BS automatically rolls you over into a new bond, too.

With Skipton BS, you end up in a new oneyear bond unless you tell it what you want to do. Once there, you have a 21-day window to get your money back. After that, there are no withdrawals until the end of the term.

Santander says it will contact you around 14 days before the end of the term. If you don’t act, your money is transferred into a 12-month Fixed Rate Reward Bond. Here, you earn just 0.15 pc plus a bonus of 0.1 pc if you leave the account open for a full year — a total of 0.25 pc, or £2.50 on each £1,000. You can take your money out at any time.

Halifax dumps you into its Instant Saver, paying 0.2 pc. You get the same treatment at Lloyds, where you end up earning 0.2 pc.