The new issue of the NS&I Green Savings Bonds now pays 4.20% gross/AER fixed-rate over a three-year term, up from 3%.
Savings into Green Savings Bonds are used to fund green projects across the UK as part of the UK Government Green Financing Framework. The largest spends of the project have been on renewing railway tracks, investing in flood and coastal erosion prevention, and funding for businesses and homes to install renewable heat systems.
The question is, are they worth saving into from monetary perspective?
Laura Suter, head of personal finance at AJ Bell points out that savers who put their money into the first issue of the green Bonds, which paid just 0.65% when launched 18 months ago, may well be “frustrated that they are locked into that deal, with new customers able to get a far higher rate.
“Someone who put £5,000 into the bonds at launch will be earning just £32.50 a year in interest, compared to the £210 a year that a new customer will be getting now. If they had invested £20,000 that difference in interest jumps to more than £700 a year.”
Suter adds: “Three years is a long period to fix your savings for, and savers need to think about what might happen to interest rates during that time.
“Recent years have shown us it’s impossible to predict the direction of interest rates accurately over such a long period, but with the Bank of England still expected to hike interest rates this year, 2023 could bring further rate rises in the savings market. That means anyone who locks into a three-year account today will miss out on these rate increases this year, if they materialise.
“One option could be to hedge your bets and invest some of savings in a fixed-rate deal and keep the rest in the top easy-access account to benefit from any future rate rises.”
