The long awaited green bonds from National Savings & Investments (NS&I) have launched and will be available to savers looking to back sustainable projects and tackle climate change.
The bonds offer a fixed interest rate of 0.65% per year over three years and the opportunity to green your finances.
Although the green bonds will allow savers to back environmental projects, the paltry interest rate will disappoint, according to experts.
“Why would savers lock their money away for three years for the same interest rate they can currently get in an easy-access savings account? This equation makes even less sense now the nation is looking down the barrel of an interest rate rise from the Bank of England, which will lead to a hike in savings rates,” says Laura Suter, head of personal finance at AJ Bell.
Rachel Springall, finance expert at Moneyfacts, adds: “There are alternative brands offering green products, such as Gatehouse Bank which pays 1.78% gross as an expected profit rate on its three-year fixed Green Saver where a tree is planted on the savers' behalf. Some savers may not be too keen to lock their money away for two or three years, but there are fixed bonds for 12 to 18 months that pay over 1%. Savers could also seek out mutuals which support local causes, and some even pay a reasonable return on their easy access accounts at the moment.”
Why should I save in green bonds?
Although the interest rate is far from attractive, some savers may still find it appealing as NS&I is backed by the government and your money is 100% secure.
The bonds also allow you to back projects such as recycling schemes, zero emission buses, renewable energy and flood defences.
The government said in return it will report back on the social co-benefits of the projects funded, so savers will also be able to track metrics such as the number of jobs created and SMEs or households who have benefitted.
“This transparency will now be critical to savers who know they will be accepting a lower interest rate, for the peace of mind that they are funding the UK’s green dreams,” Becky O’Connor, head of pensions and savings, interactive investor, says.
According to government research, around 80% of people aged between 25-44 would be very or fairly interested in the concept of a green savings product, and that 42% of 18–34-year-olds would be willing to accept a lower return on their savings if they knew their money was being put towards green projects.
How can I apply for the green bonds?
The bonds are available online via National Savings & Investments. Anyone over age 16 can apply.
It is expected the green bonds, will be available for the next three months from 22 October 2021.
Once you pay in, the money is locked and you can not take it out until your three year fixed term ends. Once the bond matures, you’ll get your money back plus the set interest rate.
The minimum investment is £100 and the maximum you can save is £100,000.
The interest rate is guaranteed, but you should not pay into a fixed rate bond if you think you may need your money before the three year term ends.
If you’re looking to save for a longer period, then it is worth considering green investing, where your money can also be put to good but you will get much stronger returns.
-
Three energy firms pay £8m in switching compensation - has your provider paid out?More than 100,000 customers have received compensation after changing providers, but is now a good time to switch energy suppliers?
-
Save £300 on your supermarket shop with cashback accountsBanks, credit card companies and cashback sites are all offering cashback on your supermarket shop, but can you use them all to max out your savings?
-
Save £300 on your supermarket shop with cashback accounts
Banks, credit card companies and cashback sites are all offering cashback on your supermarket shop, but can you use them all to max out your savings?
-
More than 150,000 grandparents missing out on £1,500 state pension uplift: how to claimGrandparents who provide childcare by looking after their grandchildren could be missing out on valuable state pension money worth thousands. We look at how much extra you could get and if you’re eligible
-
Can you reclaim bank charges?If you’ve incurred bank charges over the years, these can add up to hundreds of pounds – but can you get your money back? We look at whether you can make a claim and how to do it
-
HSBC extends deadline for customers to secure bigger interest-free overdraftHSBC customers now have until 10 May to increase their interest-free overdraft limit from £25 to £500. First Direct, Lloyds and Nationwide also offer similar support. We explain everything you need to know
-
New banking hub locations revealed - is there one near you?The rise of banking hubs is in response to a stream of local branch closes. With more planned to launch soon, we look at what services they offer and where you can find one
-
April 2023 premium bond winners revealed - are you a millionaire?Two premium bond holders have won £1 million each this month and there are many other prizes for another 5,018,742 winners in April. We look at how to find out if you’ve won
-
State pension underpayment warning - have you been underpaid and eligible for more than £11,500?Thousands of retirees, mainly women, are still owed money by the government after being underpaid their state pension. We explain what you need to know
-
State pension age rise to 68 delayed - what it means for your retirementThe state pension age will stay at current levels for longer than expected after the government today confirmed that it has shelved plans to increase it to 68 by the late 2030s. We explain what it all means for you
