A guide to bond maturity dates

Investing in Fixed Rate Bonds is a little like placing an order and waiting for the delivery date. Excitement and patience bundled into one. When you open a Fixed Rate Bond, you’re setting money aside for a future date – you know it’s coming back, and with a little extra on top. And you can think of the bond maturity date being like the delivery date for your savings!

But what does the maturity date really mean for your savings? How do different maturity dates impact returns? And what should you consider when choosing the right bond to meet your financial goals? Let’s take a look.

What is a bond maturity date?

A bond maturity date is the date when the bond’s term officially ends, and the money you originally invested, along with the interest earned, is returned to you. Bonds come with different maturity lengths, ranging from short to long-term and so choosing the right maturity for you will depend on your financial goals.

Can bonds gain in value after the bond’s maturity date?

In simple, no. Once the bond reaches maturity, it pays back the original investment and any agreed interest. It can only continue to earn interest if it’s reinvested.

How will I know when my account is maturing?

We’ll contact you by letter or email in plenty of time to let you know your account maturity date to let you know your maturity is approaching. Find out the full timelines and account maturity details here. here. Remember, you need to submit your maturity instructions online or your money will be placed into a maturity holding account.

Types of maturity dates

Not all bonds are built the same - some mature quickly, while others can take decades. Here are the three main types of bonds you'll come across:

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    Short-term bonds

    These have the shortest turnaround and best for quick investments. Hodge short-term bonds are 1 or 2 years. Perfect if you have more imminent saving goals on the horizon or don't want to tie up your money for too long but still want to earn interest on your cash. Good for: those looking for short-term investments or have a short-term savings goal.

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    Intermediate-term bonds

    These bonds are around 3-5 years and offer a balance between flexibility and time commitment - giving you a steady return of interest while also being able to see the defined maturity date not too far down the line. Good for: investors who want a mind-length savings plan with predictable interest returns.

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    Long-term bonds

    Long-term bonds can run from 6 years up to decades - keeping your money safe and growing in interest over a longer period. Good for: anyone thinking about longer-term financial planning and will not need access to your savings in the short or medium-term.

What is Yield to Maturity (YTM)?

Yield to Maturity (YTM) is more relevant for longer-term bonds or tradable bonds which can be influenced by price fluctuations. The calculation is worked out based on factors such as a bond’s current price, the interest payments (sometimes referred to as coupon payments), the time left until maturity.

It can feel complex, but there are online calculators that can help you estimate what your total return will be on maturity. We would always recommend speaking with a professional independent financial adviser.

What influences bond maturity choices?

If you're thinking more long terms, such as retirement planning, long-term bonds could be the right decision for you. The bonds risk level Short-term bonds are generally less risky but can offer lower returns on your investment. Longer-term bonds can provide better yields but can be more sensitive to changes in the market and fluctuations of interest rates. Interest rates If interest rates rise, the value of existing long-term bonds can drop - as newer bonds may offer better returns. Inflation can eat into your returns, so always consider how it may affect longer-term investments.

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    Investment goals

    Your savings goal will be key in determining the term you choose. If you'll need money in the next few years, such as for a wedding or house deposit, short or medium term bonds could be best. If you're thinking more long terms, such as retirement planning, long-term bonds could be the right decision for you.

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    The bond risk level

    Short-term bonds are generally less risky but can offer lower returns on your investment. Longer-term bonds can provide better yields but can be more sensitive to changes in the market and fluctuations of interest rates.

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    Interest rates

    If interest rates rise, the value of existing long-term bonds can drop - as newer bonds may offer better returns. Inflation can eat into your returns, so always consider how it may affect longer-term investments.

Types of bond saving strategies

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    Bond laddering

    Laddering is when you spread your savings over multiple investments such as bonds or ISAs, each with staggered maturity dates. The benefit here is that you have the option at maturity to either reinvest or use the savings as needed. You reduce the risk of locking in all your funds at one rate and could be able to take advantage of higher interest rates available at the time your bond matures.

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    Matching maturities to financial goals

    Another strategy is to align your maturity date with a specific financial goal. For example, if you're saving for a house deposit, and you have £10,000 but know it will take you another 3 years to save another £10,000 you need, then you could lock away the £10,000 you have into a 3-year Fixed Rate bond. On the flip side, if you are in your 40s and have a lump sum you want to put away for your retirement, you may want to consider a longer-term bond with a maturity date of 10, 20 or even 30 years.

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    Redeeming bonds before maturity

    Most Fixed Rate bonds are designed to be held until maturity, but some allow early redemption if you find you need access to your funds sooner than planned. There may, however, be drawbacks such as penalties or fees for early withdrawals like losing out on the full interest you would have earned. If you're considering an early withdrawal, it's always worth checking the terms first.

Hodge bonds and maturity

If you have a Fixed Rate savings account with Hodge that is coming up to it’s maturity date, you have a few options.

One option is to reinvest your savings. You could reinvest your money in an Easy Access account if you want it within reach, or into another Fixed Rate account if you don’t need access to the funds straight away. You can view your Hodge bond and the current interest rates available to you in your online banking portal. Another option is to withdraw your funds to use as you may have planned.

And don’t worry, if time has lapsed and you haven’t made the decision yet of what to do with your funds, we’ll temporarily move your balance into a maturity holding account while you decide what to do. Just note that this account has a low interest rate and is only meant to be used in the short term while you decide what to do next.

You’ll find everything you need to know about your maturity date here.

Hodge Fixed Rate Bonds

At Hodge, we offer 1, 2, 3 and 5 year Fixed Rate Bonds, giving you flexible options to suit your savings goals.

Watch our quick Fixed Rate Bond video and in under two minutes, you’ll have all the basics you need to know about Fixed Rate Bonds, interest rates and how they could benefit your savings plans.

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Final thoughts

Bonds are a straightforward way to save, offering clear terms and interest earned. The key will be choosing the right maturity date that works for you.

At Hodge, we’re all about helping you make informed choices whatever stage of life’s financial journey you are on – whether you’re dipping your toe into savings for the first time or you’re an experienced saver. Find out more about our Fixed Rate bonds, interest rates and bond basics here.

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This article is correct at time of publishing and for general information purposes only. We recommend you speak to a professional financial adviser for advice. You can find a financial adviser and further personal finance information at https://www.unbiased.co.uk/

FAQs

Common questions about bond maturity dates

We’ll contact you by letter or email 90 days before your account’s maturity date to let you know your maturity is approaching. We’ll send you another reminder 30 days before your account maturity date with instructions on what to do next, and a final reminder 14 days before your account matures.

Remember, you need to submit your maturity instructions online or your money will be placed into a maturity holding account.

This is a type of account  opened when your Fixed Rate Bond or Cash ISA reaches maturity, if you haven’t told us what you want to do with your money next. Its purpose is to temporarily hold your money until you decide,  but has a low interest rate. You can get a better interest rate in one of our other accounts or with another provider.

 

If you have a Fixed Rate Bond or a Cash ISA, we’ll let you know before your savings account is due to mature, and you’ll need to let us know what you’d like to do next. You can do this by logging into your account online and submitting maturity instructions.

You can chose to withdraw, reinvest all or part of your funds. Visit our ‘account maturity’ web page for more information.

Easy Access accounts do not mature.

There are a few great benefits to putting your cash into fixed bond savings, including:  

  • The longer you save, the more you save: If you can part with your cash for a longer amount of time, you’ll often get better interest rates. This makes it a great option if you’re depositing a big lump sum that you won’t need to access. 
  • Higher interest rates: Because we know how long your money will be with us, we can often offer you higher interest rates than some of our other accounts. 

  • FSCS protection: up to £85,000 is protected by the Financial Services Compensation Scheme (FSCS), so you can be rest assured that your money’s safe and secure.  

If you’re 18 and over and a UK resident, and have a minimum of £1,000 to deposit then you’re eligible to open a fixed rate bond with us. You should only consider this type of savings account if you won’t need to access your money for a fixed period. Additionally, if you’re a regular saver, fixed bond savings may not be suited to you as, after opening your account, you’ll have 14 days to deposit your money, then after that you won’t be able to add anything else.  

A fixed bond savings account allows you to put your cash away for a set amount of time where it’ll earn a fixed amount of interest. During this period, you won’t be able to access your money, but you may get to benefit from a higher interest rate than our other types of savings accounts.  

Fixed rate savings bonds are usually best suited to those depositing a large amount of money. 

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