NS&I has lowered the interest rate on its Green Savings Bond again, a Treasury-backed savings account which puts your cash towards green government infrastructure projects.
The account now pays guaranteed annual interest of 2.95% AER, as long as you are happy to tie your money up for three years. The bond previously paid annual interest of 3.95% AER for three years, so it has become less competitive.
Sarah Coles, head of personal finance at Hargreaves Lansdown, an investment platform, said the reduction was likely given that the savings market is cutting its rates. She also said the cut comes at a time when the government feels it’s raised enough funding for sustainable projects.
“It [the government] was always committed to raising funds through a combination of this savings product and Green Gilts, and the gilts have always brought in the vast majority of the cash,” she explained.
While you can earn significantly more interest with a normal savings account, if your cash being used for ethical projects is important to you, the shortfall may be worth it.
In this article we explain:
- What is a Green Savings Bond?
- What is the interest rate on Green Savings Bonds?
- Is the green savings bond worth it?
- What will the Green Bonds be invested in?
- How can I buy Green Savings Bonds?
Related content: Premium Bonds odds have improved – are they worth buying?
What is a Green Savings Bond?
If you are conscious about the environment and looking to save for the future then you can buy Green Savings Bonds from . NS&I is backed by the Treasury, so your money is fully protected if things go wrong.
You can invest between£100 and £100,000 in the green bonds and your money will be used to fund environmental projects chosen by the government.
You will need to feel comfortable tying your cash up as the bonds are fixed for three years. There is a 30 day cooling-off period if you change your mind.
With 25 million customers, NS&I is the same organisation offering Premium Bonds, the nation’s favourite savings product.
For more ethical tips, read our article on how to save money by going green.
What is the interest rate on Green Bonds?
In January 2024, NS&I lowered the rate on its green bond again. It now pays an interest rate of 2.95% AER a year, fixed for three years.
This means that if you invested £10,000 you would earn £295 per year or just under £10,912 in total over three years after compound interest.
The current version is the seventh issue of the bond.
Is the Green Savings Bond worth it?
The Green Savings Bond was one of the top paying fixed-rate savings products available when the rate increased to 5.7% AER last August. However, that rate reduced to 3.95% AER in November and faced a further reduction to 2.95% AER in January. Today you can earn far more lucrative rate elsewhere.
The top paying three-year fix is now around 4.50% AER% – 1.55 percentage points more than the Green Savings Bond.
So while your savings are going towards sustainable causes, you can earn much more interest elsewhere and it’s something to bear in mind. You also need to consider that you will have to lock your cash away for three years to benefit.
If you’d rather have the flexibility to be able to make withdrawals, you might want to look at the top-paying easy-access and notice savings accounts instead. Even the top easy-access account pays 5.15% AER, significantly more than the Green Savings Bond does now.
To make sure your savings are getting the best possible rate with the best provider, check out our best savings accounts.
Who is eligible to buy Green Savings Bonds?
In order to be eligible to buy Green Savings Bonds you must:
- Be aged 16 or over
- Be a UK saver
- Have a British bank account that can receive BACS payments
- Have at least£100 to open an account
- Not put in anymore than £100,000 per person
Where will the money I put in Green Savings Bonds go?
The money that you save in the bonds will be invested to help finance the government’s environmental projects. These include:
- Making transport greener
- Using renewable energy over fossil fuels
- Preventing pollution
- Using energy more efficiently
- Protecting natural resources
- Adapting to a changing climate, e.g. flood defencesand early-warning systems
If you want to know more about how you can be more green with your money, check out our guide on ethical investing.
How can I buy Green Savings Bonds?
Savers have been able to buy the green bonds online on the since 22 October 2021.
Did you know that you can also be ethical with your pensions? Find out more about how to choose investments for your retirement that make a positive impact.
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