NS&I Doubles the Interest on New Green Savings Bond | moneyfacts.co.uk

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Michael Brown

Content Writer
Published: 15/02/2022

National Savings and Investments (NS&I) has released a second issue of its Green Savings Bond, which is double the interest rate of its first issue.

The new issue will offer investors a fixed rate of 1.30% annual equivalent rate (AER) over a three year term, and is available to purchase today. It is an improvement on the first version, which was launched in October at 0.65% AER for a fixed three-year term.

“The decision to increase the rates by NS&I is not a surprise,” said James Blower, Head of Digital at Moneyfacts.

“It looks highly likely the decision to increase rate has nothing to do with market conditions but limited take-up from savers,” he explained.

The Green Savings Bond is designed to help fund the Government’s green spending projects for a sustainable future. Investors can purchase these bonds with a minimum of £100 or a maximum £100,000 per person.

“This new Issue means that savers can save at a new competitive rate whilst also supporting the UK’s green agenda in six key areas to help make our environment greener, cleaner and more sustainable,” said Ian Ackerley, Chief Executive of the NS&I.

Although the support for these green projects is welcome, savers could find better rates on the market, according to Rachel Springall, Finance Expert at Moneyfacts.

“Some savers may not be too keen to lock their money away for two or three years, but there are plenty of fixed bonds for 12 to 18 months that pay over 1.40%, there are even some notice accounts too paying over 1%. Savers could also consider putting their cash in a savings account with a building society, which supports local causes,” she said.

Still, she also noted that because NS&I is a trusted brand it may entice savers to save with the state-owned savings bank.

This opinion was echoed by Sarah Coles, senior personal finance analyst at Hargreaves Lansdown.

“Doubling the rate still leaves the bonds a long way short of the best on the market, but is likely to win over a good chunk of savers who want to do the right thing with their money, in an account 100% protected by the Treasury, and with a brand they know and trust, without taking a massive hit to their interest rate,” she said.

A missed opportunity

Although the improvement in the rate is welcome, savers who invested at 0.65% AER are likely to feel aggrieved, according to Blower.

“While there is no obligation to do so, it would be a nice gesture if NS&I increased the rate on those [the Green Savings Bond first issue] to 1.30%, in line with what new savers will receive,” he said.

Despite the expected new interest in these bonds, Blower does not expect NS&I to reach its £15 billion investment target.  

“There are still better returns for savers elsewhere so this remains a product which should only be of interest to savers wishing to fund the green infrastructure products the bonds will support,” he explained.

Other products on the market

For more details on what rates other providers are supplying for three-year fixed rate bonds, use our table here.

The Bank of Ceylon, QIB UK, and UBL UK all offer investors 1.85% AER for their 3 Year Fixed Term Deposit, which is 0.55 percentage points more than the new NS&I Green Savings Bond.

For a slightly lower 1.65% AER, you can also make use of Aldermore’s 3 Year Fixed Rate Account. 

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