What is a savings bond?

Savings bonds let you earn interest on money you put away for a set period. Some bonds pay a fixed rate of interest, while others offer regular income payments, tax-free prize draws, or returns linked to changes of interest rates.

There are several types of savings bonds, including fixed rate bonds, tracker bonds, Premium Bonds, government bonds and income bonds. Each works differently, but all are designed to help you grow your money while matching different savings goals.

You may not be able to access your money during the term. Check the withdrawal rules before you pay in. This guide explains how savings bonds work, the types available, and what to consider before choosing one.

Here, we look at:

How do savings bonds work?

Types of savings bonds

Can you transfer savings bonds?

Do you pay tax on bonds?

Is a savings bond right for you?

How do savings bonds work?

Pay in a lump sum

With most savings accounts, you make regular deposits over time. A savings bond works differently. You make one initial deposit, and that money stays in the account for the full term.
Use the deposit window

Some providers may give you a window to add to the deposit (usually up to 14 days), but you won’t be able to add more money once this window closes.
Check the rate and deposit limits

The initial deposit required will also vary – usually between £100 and £5,000, depending on your provider and bond type. The interest rate of your bond will determine the returns on your savings. With a fixed-rate bond, the interest rate stays the same for the agreed term.
Keep your money for the agreed term

Make sure you can set the money aside for the full term. When the bond matures, you can access your deposit and any interest due. You may also have the option to move the money into another savings product.
Check access and protection

Early withdrawals may not be allowed. If you close the account early, you may pay a fee or receive less interest. Check whether the account is eligible for FSCS protection. If you need regular access to your savings, we have ISAs and savings accounts that may be more suitable.

Types of savings bonds

There are many types of savings bonds available. However, their availability may differ among providers. The most common bonds include:

Fixed rate bonds
Tracker bonds
Premium Bonds
Government bonds
Income bonds

The right one for you depends on your savings goals and personal circumstances. Here’s how each one works.

What is a fixed rate bond?

Fixed rate bonds, also known as fixed rate savings accounts, offer you a fixed amount of interest for the duration of the bond’s period (or ‘term’). Your rate won’t change, even if the wider market rates go up and down.

If you want to know exactly how much interest you'll earn, a fixed rate bond may be the right choice.

Find out more about an HSBC Fixed Rate Savings Account. Eligibility criteria apply.

What is a tracker bond?

Tracker bonds offer interest tied to a specific index, like the Bank of England Base Rate. This means your returns will depend on changes in the Base Rate and can go up or down.

Tracker bonds can help your savings keep pace with the cost of living when rates rise. But they offer less certainty than fixed rate bonds.

HSBC doesn’t currently offer tracker bonds.

What are Premium Bonds?

Premium Bonds are slightly different from tracker and fixed rate bonds.

Instead of earning interest, you can win a tax-free prize in monthly draws. These prizes can be payments between £25 to £1 million.

Although the chances of winning may be slim, you have the potential to make large financial gains. This can make a Premium Bond very appealing.

HSBC doesn’t currently offer Premium Bonds.

What are government bonds?

UK government bonds are known as gilts (short for gilt-edged securities). They’re effectively a loan from investors to the UK government.

When you buy a gilt, you’re lending money to the government. In return, the government aims to:

Pay you regular interest payments (known as the coupon), and
Repay the amount you originally invested (the principal) when the gilt reaches its end date, known as maturity

What are income bonds?

In the UK, income bonds are savings or investment products that pay interest to you regularly – often monthly – usually straight into your bank account.

The term most commonly refers to NS&I (National Savings & Investments) Income Bonds. It can also be used more broadly to describe other products designed to provide a regular income, such as fixed-term guaranteed income bonds or investments that pay regular distributions.

It’s worth noting: 'income bond' isn’t a single, standard product name, so the interest rate, term, access to your money and level of risk can vary depending on the provider and the type of bond.

Here’s a quick comparison of common types of savings bonds, including how they work and how you could earn a return.

Savings bonds comparison
Bond type	What it is	How you could get returns	Certainty of returns	What affects the return	Notes / availability
Fixed rate bond (fixed rate savings account)	A savings account that pays a fixed interest rate for a set term	Fixed interest for the duration of the term	High – rate won’t change during the term	Not affected by market rate changes during the term	HSBC offers an HSBC Fixed Rate Savings Account (eligibility criteria apply)
Tracker bond	A bond that pays interest linked to an index (for example Bank of England Base Rate)	Interest can rise or fall in line with the index	Lower – returns can go up or down	Changes in the Base Rate (or chosen index)	HSBC doesn’t currently offer tracker bonds
Premium Bonds	A prize-based product rather than paying interest	Tax-free prizes in monthly draws (£25 to £1 million)	No guaranteed return	Your chance of winning in the prize draw	HSBC doesn’t currently offer Premium Bonds
Government bonds (gilts)	A loan from investors to the UK government, with a set end date	Regular interest payments (coupon) plus repayment of the original investment (principal) at maturity	Generally more predictable than prize-based products; depends on the gilt terms	The coupon rate and the maturity date set for the gilt	Principal is repaid at maturity
Income bonds	A broad term for savings or investment products designed to pay regular income	Regular interest payments, often monthly, usually paid to your bank account	Varies by provider and product	Product terms (interest rate, term, access to money, risk level)	Often refers to NS&I Income Bonds; can also mean guaranteed income bonds or income-paying investments

Can you transfer savings bonds?

Once your bond term ends, you can withdraw or transfer your money into another account.

Typically, you’re unable to transfer your bond to someone else. However, if you buy a Premium Bond for a child under 16, you must nominate a parent or guardian to manage the bond. The provider will then transfer bond management to the child once they turn 16.

Do you pay tax on bonds?

The interest earned on fixed rate bonds is taxable. However, most people can earn some interest on their savings without paying tax.

Depending on what income tax band you’re in, you may get up to £1,000 of tax-free interest. This is your personal savings allowance.

For more information, visit GOV.UK: Tax on savings interest

Remember that tax rules can change, and any benefits will depend on your circumstances.

Is a savings bond right for you?

A savings bond can be a smart way to grow your money if you’re able to set a lump sum aside for a fixed period and don’t need to access it along the way.

Before you decide, compare savings bonds, ISAs, and other savings accounts to find the option that best matches your goals.

This article was last updated:01/10/2026, 05:59