21 Nov 2024

What happens when a bond ends?

In these days of low returns, fixed rate bonds have for many become the savings vehicle of choice but what happens when the term comes to an end? Confusingly, there are three correct answers to this question.

Some providers will send you your money back
Some providers will put your money into a pre-designated account
Some providers will contact you

Without one clearly defined system it is essential that you not only remember when the bond ends but also what you have agreed will happen next.

Sylvia Waycot, financial expert at Moneyfacts.co.uk, said:

“Moneyfacts research has shown that ‘contacting you’ could mean a month before the bond ends, two weeks before the bond ends or even an unspecified time before the bond ends.

“The purpose of the contact could be to find out where to put your money or it could be to tell you where the provider has decided to put it.

“This could be an unattractive back of the cupboard account that pays virtually nothing and it could stay there indefinitely unless you spring into action and move it to a better account.

“If you ignore the letter, or you were on holiday for two weeks when it arrived, you could find that the provider has reinvested your savings into a similar account. If the original bond was for five years, so the new one could also be for five years, but the rate may be quite different from five years ago.

“If you find you have been locked into another fixed rate bond, then all the penalties for early withdrawal will apply. This could mean an interest penalty, which is in effect a fine for early withdrawal, or it could mean you can’t get your hands on your money at all for the duration of the term.

“Fixed rate bonds are an attractive option for anyone willing to tie their money up for a set period of time and the operating rules for the life of the bond are very clear.

“However, what happens at the end of the term is less clear and would benefit from an industry standard. Until that happens we are left to the mercy of a varied and confusing journey that could end in a loss of money.”

Fixed Rate Bond Averages
1 Year bond		2 Year bond		5 Year bond
2011	2012	2010	2012	2007	2012
2.79%	2.64%	4.48%	4.57%	6.54%	4.60%
Source: Moneyfacts.co.uk

Table of bonds

WHAT HAPPENS WHEN A BOND ENDS
PROVIDER	WHAT HAPPENS ON MATURITY	WHAT HAPPENS NEXT
Tesco Bank	We will write to you before the end of the fixed rate term to give you options to transfer your funds at maturity.	If you do not let us know what you wish us to do with your money prior to maturity, we will hold the funds in the account for you and it will earn a variable rate of interest. You will be notified of the variable interest rate prior to maturity.
United Bank UK	At least 15 days before the end of the Term, we will write to you asking for instructions about what you would like us to do with your Term Deposit.	If you do not give us instructions before the end of the Term (or we cannot reasonably comply with your instructions), on the last day of the Term we will reinvest your Deposit in a new Term Deposit whose term is closet in length to your original Term Deposit. If a similar Term Deposit is not available an alternative investment will be offered.
Close Brothers Savings	Prior to the maturity of your fixed term account we will write notifying you of the options that are available to you at the time. I	f we do not hear from you, on maturity, the interest you have earned will automatically be paid into your nominated bank account and the principal amount will automatically be re-invested into a 1 year fixed term fixed rate product that is prevalent at the time of maturity
BM Savings	We'll write to you before your account matures.	If we don’t hear from you by the time your account matures it will be deposited into an easy access account of our choice
Scottish BS	When the fixed rate term ends, you will have one calendar month to make withdrawals without notice or penalty. We will write to remind you of this shortly before your term ends.
State Bank of India	Depending on bond, the maturity proceeds will be credited to savings or current account with us or the deposit will be renewed automatically for the same period if no instructions are received at maturity.
Halifax	At the end of the fixed term, unless we receive instructions from you, your account will automatically transfer to a Matured Funds account currently paying interest at the rate of 0.10% gross/AER fixed on balances of £1,000 and over.
Vanquis Bank	Your Account will mature at the end of the Account term on the specified maturity date. Prior to maturity of the Account, we will write to you, telling you that your Account is about to mature and giving you the option either to withdraw the money from your Account or to re-invest it in another Fixed Term Saving Account with us.	If we do not receive instructions from you before the maturity date, we will automatically re-invest all the money in your Account in a follow-on account. The follow-on account will be the Fixed Term Saving Account from the range we are then offering to new customers which we reasonably consider to be the closest match to the matured Account
Clydesdale Bank/Yorkshire Bank	We will contact you approximately 5 weeks before the Maturity Date to discuss options and your instructions for dealing with the Maturity Amount including your instructions on whether the Maturity Amount is to be paid into the Repayment Account (if appropriate) or some other account in your name.	Once we have contacted you, if we do not receive your instructions at least 5 Business Days before the Maturity Date, the Maturity Amount will be paid into another Term Deposit Account in your name for a term equal in length to the Fixed Term at the interest rate applicable to such term deposit on the Maturity Date.
AA	At the end of the term we'll write to you before your account matures, giving you the options to help you decide what to do with your savings.	If we do not hear from you before your account matures we'll automatically re-deposit your funds into a variable rate easy access savings account of our choice.
Aldermore	We will contact you prior to maturity to advise you of the options open to you.	If we do not receive a reply from you before the maturity date of your fixed rate account, we will place the proceeds of your fixed rate account into a new fixed rate account of the same or similar term.
FirstSave	Maturity - We may contact you prior to maturity to advise you of the options open to you in respect of further investments offered at that time and request you inform us of your instructions for the proceeds of the account at maturity.	If we do not contact you/receive an instruction from you before the maturity date of your Fixed Rate Bond, we will place the proceeds of your Fixed Rate Bond in an Easy Access Account.
Post Office	We will write to you shortly before your Bond matures to let you know the date of maturity and how much will be maturing. We will also inform you of the reinvestment options available at that time.	If you choose not to reinvest, and unless you advise us otherwise, then we will put your funds in an Easy Saver account. This is a variable rate savings account where you can access your savings when you choose. It can be managed by phone, post and online.
SAGA	At the end of the fixed term, we will write to you at least 14 days before the end of the fixed rate term with some choices of account to put your money into, or the option of having it returned to you, at the end of the fixed term.	We will let you know that if we do not hear from you, we will put your money into an instant access variable rate account.
Shawbrook Bank	We’ll write to you before maturity to remind you of the date that your fixed term ends. At maturity, you can either withdraw your funds or transfer them into a new Shawbrook account of your choice.	If you do not let us know what you wish to do by the maturity date, we will move it into an instant access account for you and confirm the interest rate in writing.
Virgin Money	We will email you before the end of the fixed rate period to let you know the interest payable, advise you of any further options available to you and inform you of the interest rate currently payable on the matured bond	After the fixed rate period your account will become a variable rate account.
Yorkshire BS	Prior to maturity of an eBond you will receive an email from the Society advising you of alternative investment opportunities. You will normally receive this shortly before the maturity date. The email will contain instructions on how to reinvest or alternatively how to withdraw funds should you choose this option. At the time the account was opened you will have nominated another account (either internal or external) to be used to transfer funds to upon maturity.
Source Moneyfacts.co.uk

Moneyfacts Group
Moneyfacts is the UK’s leading independent provider of personal financial information and our data is used and trusted throughout the financial industry.

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