Guaranteed Investment Bonds: The ultimate guide for savers

Choosing the right savings product is an important step in working towards your financial goals. If you're exploring different ways to save or invest your money, a Guaranteed Investment Bond (GIB) may be worth considering. But what is a Guaranteed Investment Bond, and how does it work?

In this guide, we'll explain what a Guaranteed Investment Bond is, how our Guaranteed Investment Bond works, outline its key advantages and disadvantages, and highlight some of the factors to consider before deciding whether it's the right choice for you.

What is a Guaranteed Investment Bond?

Our Guaranteed Investment Bond works in a similar way to a fixed-rate bond, where you deposit a lump sum and receive a guaranteed interest rate for the selected term. They are generally considered a low risk way to grow your savings for a set period and know you'll get a fixed return on your money.

With Unity Mutual, you can choose between a two, three or five-year term, and you'll know exactly what return you’ll receive at maturity. No guesswork, no market ups and downs to worry about. Your money stays safe for the full term, so you can sit back while it grows.

What’s the interest rate on the Guaranteed Investment Bond?

Unity Mutual offers a range of Guaranteed Investment Bond terms to suit different savings goals and timeframes. The interest rates shown below are the rates currently available and are subject to change. The table outlines the interest rate and projected return for each available term after compounding.

Advantages of Guaranteed Investment Bonds

Guaranteed Investment Bonds come with a range of benefits that can make them an appealing choice for savers. Here's what makes them worth considering:

Certainty of return 

With Unity Mutual, you know exactly what you'll get back from day one. Choose a 2, 3, or 5-year term, and your rate is fixed for the full period. There is no investment risk, and it removes any guesswork.

Simple to understand 

There's no need to track fund performance or make ongoing investment decisions. You choose your term, lock in your rate, and let it run until maturity.

Choice of terms to suit your plans

Our range of terms means you can match your investment to your own timeline, with longer terms having higher rates.

No account or management fees either way

There are no direct account or management fees on our Guaranteed Investment Bonds; the Bond terms and benefits have been designed to incorporate any charges we incur.

Considerations for Guaranteed Investment Bonds

As with any financial product, there are trade-offs that may not suit every saver. Here's what to consider before putting your money away:

Your money is locked away

If you need to withdraw your funds before the end of the term, you'll receive a significant reduction in your interest earnings. If you think you may need access to your money at short notice, this product may not be the best fit for you.

Inflation risk

A fixed return that looks attractive today may be worth less in real terms by the end of your term if inflation rises faster than your guaranteed rate. For example, if your bond offers 4% over a year but inflation is 3%, your real return is closer to 1%.

Lower growth potential than market-linked investments

Because the return is capped and guaranteed, you won't benefit from the potentially higher returns that may be available from higher-risk investments such as stocks and shares.

Minimum deposit required

There is usually a minimum and maximum deposit amount when opening a Guaranteed Investment Bond. With Unity Mutual, you can invest from £5,000 up to £250,000. Deposit limits vary between providers, so the amounts required elsewhere may differ.

Early withdrawal from a Guaranteed Investment Bond

Unlike some fixed-term providers, who lock your money away completely, we understand things can change, and we allow you to close and withdraw your investment before maturity, though at a heavily reduced rate of return. This means the following:

Your capital stays protected

If you withdraw before the end of your fixed term, an early withdrawal interest penalty will apply, but your original deposit would not be reduced, only the amount of interest you receive.

You'll receive less interest than the agreed fixed rate

Rather than losing money outright, if you withdraw your money early, you'll receive a reduced rate of return rather than the full guaranteed rate available at maturity. While the rate increases the longer the bond is held, it will still be considerably lower than the rate originally agreed when the bond was opened Full details on the rate of return can be found in the Guaranteed Investment Bond product terms and conditions.

If there's a possibility you'll need the funds before your term ends, it's worth weighing up whether an easy-access savings option might suit you better.

How does our Guaranteed Investment Bond work?

With our Guaranteed Investment Bond, you deposit a lump sum for your selected term and receive a guaranteed interest rate for the duration of your investment. Here's how it works:

1. Choose your term: Choose your bond term, between 2, 3, or 5 years and the amount you'd like to deposit (minimum of £5,000 to open a bond, and up to a maximum of £250,000).

2. Deposit your lump sum: Once your application is complete, we will provide bank details for your deposit, or you can send a cheque.

3. Your rate is locked in: The interest rate is fixed for the full term, so you know exactly how much your savings will grow.

4. You receive your Certificate of Investment: On opening your Guaranteed Investment Bond, you'll be issued with a 'Certificate of Investment' as proof of your investment, showing your investment amount, interest rate and maturity date.
5. Your bond matures: At the end of your chosen term, your original lump sum, plus the accrued interest matures. At this point, you can choose to reinvest it, or have it paid into your bank account.

Throughout the term, there are no direct account or management fees. The amount stated on your Certificate of Investment is the amount you’ll receive at maturity, provided it is kept invested for the full term.

How can I find out more about Unity Mutual's Guaranteed Investment Bonds?

Choosing the right home for your savings is a important decision, and we want you to feel confident before you make a decision. While we can't tell you whether a Guaranteed Investment Bond is the right fit for your personal circumstances, we can give you all the facts you need to make that call yourself.

Get in touch with our friendly team on 0161 214 4650, or head to our Guaranteed Investment Bonds to compare the different term lengths and familiarise yourself with the product’s terms and conditions.

Terms and conditions apply.