NS&I ups rates on Green Savings Bonds to 4.2%

NS&I has launched a new issue of its Green Savings Bonds with a fixed interest rate of 4.2 percent over a three-year term.

It is a significant increase from the last issue in August 2022, which earned 3 percent interest.

The treasury-backed savings provider hopes to entice more depositors into the bonds, which are being used to help advance the government’s green agenda – financing projects such as offshore wind power and zero-emission buses.

Since the first green bond issue was launched in October 2021 and paid just 0.65 per cent, only £300m of a £15bn target has been achieved.

Savers can get started in Green Savings Bonds with a minimum of £100, and then save up to £100,000 per person for each issue.

A saver who deposits £10,000 in the latest issue of Green Savings Bonds can expect to receive £1,310 in interest over three years.

It is worth noting that savers who have signed up for previous Green Bond issuances will not benefit from the latest rate hike.

This means those who have signed up since August when it was 3 percent and those who set it at 1.2 percent last year or even 0.65 percent in 2021 will keep the same rate.

Previous issues, unsurprisingly, have drawn criticism for the meager returns on offer.

Now, however, NS&I is at least paying a rate that’s not far off the best equivalent deals on the market.

Those looking to fix for three years can get a 4.45 percent rate with the current best-buy account, offered by Gatehouse Bank. And even those locked in for two years can do better, earning a 4.35 percent return with Close Brothers.

The top rate for a one-year bond is just a whisper away at 4.17 percent, courtesy of SmartSave Bank.

>> View 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 latest release on the performance of these was that they raised £300m of a £15bn target. Given this, it was only a matter of time before they raised rates to boost inflows.

“Since there are only nine products that pay a better rate over a fixed three-year term, these now seem well priced to attract good inflow.

“However, Trustpilot ratings from NS&I are appalling with a score of 1.2 (1 being the lowest that can be achieved), so savers wanting excellent service may need to look elsewhere.”

The money in NS&I’s green bonds goes to green projects such as offshore wind

As with typical savings accounts, the interest earned on Green Savings Bonds will count towards taxable income in the tax year that the Bond matures.

Ian Ackerley, CEO of NS&I, said: ‘This is an excellent new opportunity for savers looking to grow their wealth over the next three years, while knowing that their investment will make a difference by helping the government’s green projects finance.

‘Customers can save money and at the same time contribute to a greener, cleaner and more sustainable world.

“The projects include making transportation greener, using renewable energy instead of 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 steps by NS&I.

The Treasury-backed provider recently reintroduced two legacy savings products with better interest rates.

Guaranteed growth bonds pay 4 percent interest on a one-year deal, paid at maturity. Guaranteed Income Bonds pay 3.9 percent interest in monthly installments.

Premium Bonds savers are also now enjoying better payouts after it increased its prize fund to 3.15 per cent.

This is the fourth increase in the Premium Bond prize fund since interest rates started rising just over a year ago.

The latest increase means an additional £15 million in duty-free prices compared to last month, bringing the total to £314.3 million.