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A fixed-rate bond, sometimes known as a savings bond or a fixed rate savings account, is a type of savings account that holds your money for a set period of time, known as the term. You're paid a fixed interest rate on the amount you have in the bond for the duration of the term.

Fixed rate bonds usually pay a higher interest rate compared with savings accounts that give you easier access to your money. So you won't be able to take cash out or add more money during the fixed term.

This is why a fixed rate bond is a good option for those who already have a lump sum of money, but will only need the money in the next one to three years, though you can get five year fixed rate bonds as well.

Read our in-depth guide on fixed rate bonds.

Fixed rate bonds work by locking your money away for a set term, during which you earn a fixed rate of interest .

The terms on fixed rate bonds can vary from one year and go up to seven years and typically, the longer the term of the bond, the higher the rate will be.

However, unlike ordinary savings accounts, most bonds don't let you add money little by little, you need to deposit all the money you want to invest in a lump sum.

When the term ends, the bond is said to have matured. Typically, your bank or building society will contact you long before the bond reaches maturity. They will ask what you want to do with your money when the term ends and give you some options to consider.

In most cases, your provider will give you a selection of options to choose from. These could include:

• Reinvesting the money in a new bond

• Setting up a new bond with your existing funds and adding an additional amount

• Reinvesting a proportion of the bond and withdrawing the rest

• Closing your account and withdrawing all your savings

If your fixed rate bond has matured and you've chosen to cash in your money, follow these three steps.

• Complete the form provided by your bank

• Wait while your bank transfers the money into your account

• Decide what you want to do with your money

If you decide on reinvesting your money, it's a good idea to compare the latest rates on offer for a new fixed-rate bond, or consider other types of savings accounts���ǰ���investing products.

You could also speak to a financial adviser for further guidance on what to do.

With a fixed rate bond you’re locking away your money at a fixed rate for a set period. So there is a chance that interest rates may rise during that term, you may not end up earning the best rate possible over the full term of the deal.

At the same time, your original investment may not hold its value in real terms if the interest you’re getting is less than the rate of inflation over the investment period.

The resulting impact of those circumstances may affect your eventual return on investment, but it isn’t nearly as significant as losing the entirety of your investment.

The latter scenario is also highly unlikely as fixed rate bonds are protected under the Financial Services Compensation Scheme (FSCS) up to a maximum of £85,000.

If you plan on investing more than that, it's best to split any amount over £85,000 with another bank or provider. Just be sure that the new bank or provider doesn't operate under the same banking licence as your other accounts.