Ethical savings: NS&I reduces the rate on three-year green bond to 2.95%

31 January 2024 , 14:50

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Interest rates have been cut on Green Savings Bonds (Image: PA Archive/PA Images)

Green Savings Bonds have had a cut in rate according to the big savings bank NS&I, as they launched their new issue.

The new offer pays 2.95% AER (annual equivalent rate) over a three-year term, says the Treasury-backed provider. On the other hand, the old offer, which lasted until January 30, 2024, gave 3.95% AER.

The Green Savings Bonds allow savers to help fund green government projects across the UK, supporting efforts for green projects under the UK Government's Green Financing Framework. Announced in the 2021 spring budget, these special bonds are separate from NS&I's usual activity and investment in it doesn't weigh on its net financing target set each year by the Treasury.

If you're thinking of investing, you'll need at least £100 and can invest up to £100,000 per person for each issue. You will need to be 16 or over to buy these bonds and the full amount you put in will be kept for three years with no withdrawals allowed during this time.

Personal finance expert at Hargreaves Lansdown, Sarah Coles, commented: "NS&I Green Bonds have been hit by harsh pruning, slashing the rate from 3.95% to 2.95%. These were always likely to face the business end of a pair of shears as the savings market gradually heads south.

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"However, the decision to cut so soon and so hard is disappointing. It raises the question whether we will see green savings grow, or whether the harsh prune has done too much damage."

"The fundraising target for these bonds is set completely separately to NS&I's overall funding target, so this change has nothing to do with the fact the organisation is flush at the moment. There's a real risk that such harsh cuts will severely damage enthusiasm for the product. When you can still get 4.6% on a three-year bond elsewhere, you'd need to be a passionate believer in the Government's green projects to settle for as little as 2.95% right now."

* An AI tool was used to add an extra layer to the editing process for this story. You can report any errors to [email protected]

Lawrence Matheson