NS&I has launched a new issue of its Green Savings Bonds paying a fixed rate of 4.2 per cent over a three-year term.
It is a significant rise from the last issue in August 2022, which paid 3 per cent interest.
The Treasury-backed savings provider will be hoping to entice more savers into the bonds, which are used to help achieve the Government’s green agenda – funding projects such as offshore wind and zero-emissions buses.
Green deal: NS&I has has upped the rate on its green bonds to 4.2% to entice savers, having only attracted £300m of a £15bn target since October 2021
Since the first issue of the green bonds was launched in October 2021 paying just 0.65 per cent, only £300million of a £15billion target has been achieved.
Savers can get started in Green Savings Bonds with a minimum of £100, and are thereafter allowed to save up to £100,000 per person for each Issue.
A saver depositing £10,000 in the latest Green Savings Bonds issue could expect to earn £1,310 in interest over three years.
It’s worth noting that savers who signed up to previous issues of the Green Bonds don’t stand to benefit for the latest rate hike.
This means that those who signed up since August when it was 3 per cent and those that fixed last year at 1.2 per cent or even at 0.65 per cent in 2021 will remain on the same rate.
Previous issues have unsurprisingly drawn criticism for the meagre returns on offer.
However, now NS&I is at least paying a rate that isn’t far off the best equivalent deals on the market.
Those looking to fix for three years can secure a 4.45 per cent rate with the current best-buy account, offered by Gatehouse Bank. And even those fixing for two years can do better by securing a 4.35 per cent return with Close Brothers.
The top rate for a one-year bond is just a whisper away at 4.17 per cent, courtesy of SmartSave Bank.
>> Check out the best fixed rate savings bonds here.
A spokesperson for the Savings Guru said: ‘The only surprise with NS&I’s Green Bonds is that they haven’t moved sooner.
‘The last publication of performance on these was that they had attracted £300m of a £15bn target. Given this, it was only a matter of time before they raised the rates to drive inflows.
‘As there are only nine products paying a better rate over a three- year fixed term, these now look priced appropriately to start to attract good inflows.
‘However, Trustpilot reviews of NS&I are appalling with a score of 1.2 (1 being the lowest that could be achieved), so savers who want excellent service may need to look elsewhere.’
Money held in NS&I’s green bonds will go towards green projects such as offshore wind
Like with typical savings accounts, the interest earned on Green Savings Bonds will count towards taxable income in the tax year the Bond matures.
Ian Ackerley, NS&I’s chief executive, said: ‘This is an excellent new opportunity for savers who want to grow their funds over the next three years, at the same time knowing that their investment will make a difference by helping finance the Government’s green projects.
‘Customers can save while helping to make the world greener, cleaner and more sustainable.
‘The projects will include making transport greener, using renewable energy over fossil fuels, preventing pollution, using energy more efficiently, protecting natural resources and adapting to a changing climate.’
The decision to boost Green Savings Bonds follows similar moves by NS&I.
The Treasury-backed provider has recently reintroduced two old savings products with better interest rates.
Guaranteed Growth Bonds pay 4 per cent interest on a one-year deal, paid at the end of the term. Guaranteed Income Bonds pay 3.9 per cent interest in monthly installments.
Premium Bonds savers are also now enjoying better payouts after it raised its prize fund to 3.15 per cent.
This marks the fourth rise in the Premium Bond prize fund since interest rates started to climb just over a year ago.
The latest rise means an extra £15 million paid out in tax-free prizes compared to last month, bringing the total to £314.3 million.
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