The historically low base rate of interest has not been particularly kind to savers in the UK, with the measure falling from five per cent to 0.5 per cent in just 12 months. Those hoping the situation will improve are unlikely to have taken much comfort from the Centre for Economics and Business Research forecast that the rate will remain at 0.5 per cent until 2011, and will stay under two per cent until 2014.

What may be music to their ears, however, is that there are many bonds currently available that offer a highly competitive, guaranteed rate of return on funds, if terms and conditions are adhered to.

Fixed rate bonds have long been popular with investors looking to put their money into something less volatile than stocks and shares. They may not dangle a carrot of colossal returns, but have the pull of security that equities cannot. Bonds also offer a choice on how long to lock money away, with varying terms from one to five years in length, although, obviously, the longer you are prepared to put your money away for directly correlates to the generosity of the rate.

Understandably, some investors are uncomfortable with locking vast sums of cash away for any concerted period. In such instances, a short term bond offers the ideal home for your money. Savers can enjoy a rate of up to 3.75 per cent on investments starting at just £1. Those happy to invest their money for longer can get a rate of 4.65 per cent for three years, a rate which also only requires a minimum investment of £1.

For the same amount, savers can get a competitive five year fixed rate of 5.15 per cent, although a higher offer of 5.30 per cent can be had on the slightly higher minimum investment of £100.

Before jumping at these fixed rate best rates, be sure to go through the small print with a fine toothcomb. Some will allow additional funds to be placed in the account as the term progresses, while others will not and the penalties for closing bonds before maturity are likely to include some loss of interest – often a significant amount.

The most important thing is to be sure the amount invested will not be missed during the time it is accruing interest and that the terms and conditions of the bond are fully explained and understood.

By following these simple rules, investing in a fixed rate bond should be relatively painless and produce a decent rate of return on your money.

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