NS&I has increased the rate on its Green Savings Bond, putting the spotlight back on a savings product designed to support environmental projects.
NS&I has increased the rate on its three-year Green Savings Bond from 4.45% to 4.73%, prompting renewed attention on a product that combines a fixed-rate savings account with support for government-backed environmental projects.
Green Savings Bonds were first launched by NS&I in 2021 and operate like a traditional fixed-term savings product.
Savers can invest between £100 and £100,000, receive a fixed rate of interest for three years and cannot access their money until the bond matures. Savings are backed by HM Treasury.
What differentiates the product from a conventional fixed-rate bond is its environmental objective. Money invested in Green Savings Bonds contributes towards green projects chosen by the Government.
HM Treasury allocates an amount equivalent to the funds raised to eligible environmental projects and publishes information on how the money is being used and the environmental benefits delivered.
For clients interested in sustainability, the product offers a way to support environmental initiatives without taking investment risk.
However, as with many ethical savings products, the return available may differ from the most competitive rates elsewhere in the market.
Commenting on the latest rate increase, Sarah Coles, head of personal finance at AJ Bell, said: “Today’s rise still puts these products some way behind the NS&I British Savings Bonds, which offer 5.10% over the same fixed period, let alone the most competitive on the market at 5.23% at the time of writing.”
She added that the comparison looks different when set against other ethical savings options.
“For people who would only ever consider ethical savings products, the market is smaller and less competitive, so these rates compare fairly positively to significant competitors, and may be worth considering.”
The decision for savers may therefore come down to balancing environmental objectives against the level of return available.
“When it comes to savings, you tend to pay a price for green intentions – the only question will be how much of a price you’re willing to pay,” Coles said.
She also cautioned that inflation remains an important consideration for anyone locking money away for a fixed period.
“While savings rates are stronger, people may be more willing to forgo a slice of returns. However, with the outlook for inflation so uncertain, you need to bear in mind that over the course of three years, one of the things you could be sacrificing is some of the spending power of your savings.”
Main image: lime, green, sustainable, ESG, dwayne-joe-J71BteAZJ5A-unsplash
