Finance glossary
Bond
Also known as: Investment bond, Gilt, Corporate bond
In simple terms
An investment bond is like lending your money to a government or company for a set period in return for regular interest. It is different from a savings “fixed-rate bond”, which is simply a savings account.
On this page
What does bond mean?
In investing, a bond is effectively an IOU: you lend money to a government or company, which promises to pay you regular interest (the “coupon”) and return your money on a set date. UK government bonds are called “gilts”; company ones are “corporate bonds”.
This is not the same as a savings “fixed-rate bond”, which is just a fixed-term savings account with a bank or building society. A savings bond returns your cash with interest and is covered by savings protection; an investment bond is a tradeable investment whose value can move.
How a bond works
Hold an investment bond to its maturity date and, provided the issuer does not default, you get regular interest and your original amount back. But you can also buy and sell bonds before maturity, and their market price rises and falls — notably when interest rates change.
Bonds are generally less volatile than shares, but they are not risk-free: the issuer could fail to repay (default), and if you sell before maturity you might get back less than you paid. Bond funds, which hold many bonds, have no fixed maturity and their value can fall.
How could this affect me?
Bonds are often used to add steadier income and to balance the sharper swings of shares within a portfolio. Gilts are usually seen as lower risk than corporate bonds, because the UK government is considered very unlikely to default.
Their value can still fall — especially if interest rates rise — so they are not a guaranteed store of value. If you want a genuinely safe, protected home for cash, a savings account or fixed-rate savings bond is a different thing altogether.
Things to watch out for
- An investment bond is not a savings “fixed-rate bond” — its value can fall.
- Bond prices typically fall when interest rates rise, so selling early can mean a loss.
- The issuer could default and fail to repay — corporate bonds carry more of this risk than gilts.
- Past performance is not a guide to future returns.
Know your rights
- A firm selling or holding investment bonds for UK retail investors must be authorised by the FCA, and its promotions must be clear, fair and not misleading.
- If an authorised UK investment firm fails, FSCS may protect eligible investments up to £85,000 — this covers the firm failing, not losses if a bond falls in value or an issuer defaults.
- If you are badly advised or treated unfairly, you can complain and escalate to the Financial Ombudsman Service.
General information, not personal advice
Consumer Credit is an independent information service. We do not provide regulated financial advice or sell financial products. For advice on your own situation, speak to an appropriately authorised firm or a free service such as MoneyHelper. About Consumer Credit.
Sources
We checked this page against these official and authoritative sources.
- Bank of England, What are government bonds (gilts)? (opens in a new tab). Accessed 22 Aug 2026.
- MoneyHelper, Investing in bonds and gilts (opens in a new tab). Accessed 22 Aug 2026.