Fixed Interest Savings Certificates

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Fixed Interest Savings Certificates

If you want a guaranteed return on your money, then a secure home for your cash could be fixed interest savings certificates from National Savings.

You won't earn the very top rates in the market, but you will know exactly how much interest you will earn each year - good if you are planning ahead or need to build up a lump sum for the future.

Fixed interest rates

The interest rates are fixed for the length of your chosen investment term, so you usually need to be able to tie up your money for two or five years. All the interest you earn is tax-free, which is a particular incentive to higher rate taxpayers, who don't have to declare them on their Inland Revenue self-assessment form.

Invest from £100 to £15,000

You can invest anything from £100 up to £15,000 without affecting other tax free investments such as ISAs. Certificates are sold in "issues", which are dependent on prevailing interest rates

. Although they guarantee the interest rate you receive, if general rates rise over the five-year period you hold your certificates, you may earn a lower rate of return than if you put your money in a top-paying bank or building society account. What's more, they won't necessarily keep pace with inflation, which could erode the value of your original lump sum over time.

In order to get the full interest rate on your certificates, you need to be sure you can tie up your money for the full term. If you cash them in early, you will lose interest. If you are younger you need to think about putting some of your money in equity-based investments as well, since these have a potential for greater returns over the long-term.