NS&I remain ‘tight-lipped’ on Green Savings Bonds rates as savers accept ‘historic lows’
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NS&I released details on its Green Savings Bonds and over the coming months savers will be able to invest towards public spending projects. The Green Savings Bonds will, according to NS&I, allow savers to help finance green spending projects and save “while helping to make the world greener, cleaner and more sustainable.”
The new Green Savings Bonds will be available on a three year fixed-term basis and will be available to be bought online.
Savers will be able to invest between £100 and £100,000 and once money is put away, savers will not be able to access it until it reaches the end of its term.
NS&I notes however that “in return”, savers will be given a guaranteed fixed rate of interest for three years.
Despite these clarifications, NS&I has not detailed what interest rates will be available to savers through the Green Savings Bonds and according to analysis from Sarah Coles, a personal finance analyst at Hargreaves Lansdown (HL), this could prove to be detrimental.
In response to the announcement, Sarah had the following to say: “The N&I Green Savings Bond will let savers put their money where their mouth is, and support sustainable projects with their savings.
“But while it’s a useful addition to the growing world of green savings, there are already accounts with similar aims on offer.
“What really matters here is the rate, and NS&I is remaining tight-lipped on that front.
“So far, all we know is that the bond will support projects that aim to tackle climate change and make the environment greener and more sustainable – like green transport, renewable energy, and energy efficiency.
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“This isn’t enormously far from the aims of existing ethical savings accounts from the likes of Triodos Bank.
“In practical terms, the money will be passed to the Treasury and held in a general account.
“It will then release funds equivalent to the amount raised from the bonds to green projects within two years. It will report on how the money is spent, and the environmental benefits achieved.
“The fact this account will be on offer from a national treasure like NS&I will appeal, as will the fact the money is 100 percent guaranteed, up to the maximum investment of £100,000. However, this isn’t enough to drive a blockbuster savings product: the rate needs to be competitive to draw significant savings.
“The timing may well be wrong for revealing the rate right now. Over the past few weeks, smaller banks have been competing hard at the top of the fixed rate savings tables, pushing the most competitive rates up. This is likely to die back as these banks fill their coffers, so NS&I may want to announce the rate at a time when it compares favourably to the best on the market.”
While Sarah noted interest rates may be a key factor in determining NS&I’s success, additional research from Quilter showed savers may be more willing to accept lower rates than one would expect.
This week, the Bank of England released its latest Money and Credit statistics and David Gibb, a chartered financial planner at Quilter, examined the data.
David broke down the nation’s savings habits: “Despite inflows into bank and building society accounts declining as lockdown is gradually lifted, the UK population remains addicted to cash savings.
“With £7billion flowing into cash accounts in May, the Bank of England has highlighted these new deposits are attracting average interest rates of just 0.33 percent, historic lows.
“With inflation running at 2.1 percent and expected to rise further, people’s cash is just being eaten away while it sits idle and the problem is only going to be exacerbated as the recovery goes on.”
While it remains to be seen what NS&I will offer as an interest rate for its Green Savings Bonds, one may be able to gauge what could be offered by examining its existing product range.
As it stands, savers can save into the following products:
- Premium Bonds – one percent annual prize fund rate
- Junior ISA – 1.5 percent
- Income Bonds – 0.01 percent
- Direct ISA – 0.1 percent
- Direct Saver – 0.15 percent
- Investment Account – 0.01 percent
For comparison, Moneyfacts.co.uk’s latest “Pick of the Week” highlighted Close Brothers three year Fixed Rate Bond account as offering the best option for savers, which currently pays a rate of 1.1 percent AER.
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