Top new two-year 3.7% fixed bond from KRBS

By DAN HYDE
Updated:

 

Kent Reliance has launched a top-paying 3.7% two-year bond for savers looking to secure a fixed rate of return.

Money in a purse

The building society's bond to savers with more than £1,000 available as a minimum deposit.

After tax is deducted, the account pays 2.96% to basic rate taxpayers and 2.2% to higher rate taxpayers.

Savers must be certain they can afford to lock away their cash for the full two years as no access is permitted in the intervening period.

KRBS' bond sits at top spot in This is Money's independent savings tables.

Just behind are the Post Office, offering 3.65% (2.92 after basic rate tax) and Santander, which offering 3.55% (2.84 after basic rate tax) provided a minimum deposit of £25,000 is met.

Dan Hyde, savings correspondent for This is Money says: Savers keen on a two-year fix can only see the new KRBS rate as good news.

Money stored the Post Office is now protected under the UK compensation scheme – which will pay up to £85,000 in the event of a collapse. But it is still overseen by the Bank of Ireland, which does have a greater risk than most of going belly-up. So some savers may still feel wary.

Dan Hyde

Meanwhile, Santander – in third place in our tables – was plagued by customer services issues in 2010. Do savers believe it is as committed to improving its relationship with customers as it insists? If the stories filling my inbox are to be believed, many of the problems it experienced last summer are recurring ones.

If that's enough to sway savers away, then KRBS might have the answer with a new best buy.

However, the bigger question, I'd suggest, is whether a two-year bond is appropriate at all. With interest rates predicted to rise from their record low 0.5% this year, now might not be the time to lock up your cash.

But to get a decent return, it's almost impossible to avoid this. The answer is to split your money between different accounts. Some should go in bonds, the rest in Isas (cash and investment), instant access accounts and the wider investing world (if you're brave).

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