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NS&I green saving bonds go on sale with fixed 0.65% interest rate

A “world first” green savings bond from National Savings and Investments (NS&I) goes on sale today, giving people the chance to back the government’s environmental projects and join the fight against climate breakdown.

Article originally published by The Guardian. Hargreaves Lansdown is not responsible for its content or accuracy and may not share the author's views. News and research are not personal recommendations to deal. All investments can fall in value so you could get back less than you invest.

A “world first” green savings bond from National Savings and Investments (NS&I) goes on sale today, giving people the chance to back the government’s environmental projects and join the fight against climate breakdown.

But at 0.65% fixed for three years, the interest rate prompted widespread disappointment, with the MoneySavingExpert.com founder Martin Lewis labelling it “pants” and “paltry”.

A rate of 0.65% is well below the return offered by the top-paying standard fixed-rate savings bonds. On Thursday it was possible to obtain a rate of up to 1.81% on a three-year bond, while Zopa and Atom Bank were offering 1.6% and 1.45% respectively over three years.

“Someone investing £20,000 at 0.65% will earn £130 a year in interest with NS&I compared with the best-buy deal from JN Bank at 1.81% which pays £362 per annum – a difference of almost £700 over three years,” said Andrew Hagger, a personal finance expert at the website MoneyComms.

The new bonds can be bought online from today – just days ahead of the Cop26 climate summit – and will be on sale for at least three months.

The money invested will help finance green projects chosen by the government, which could include zero-emission buses, offshore windfarms and flood defences, and tree-planting and environmentally sustainable farming schemes.

The bonds, announced by the chancellor, Rishi Sunak, in the spring budget, have a minimum investment of £100 and a maximum of £100,000. Savers’ cash cannot be withdrawn during the three years.

The Treasury said it was the world’s first green savings product from a sovereign issuer. With NS&I, the government-backed organisation that offers premium bonds and other products, 100% of people’s money is guaranteed by the Treasury.

Officials believe that with demand for environmentally-friendly investments growing, the bonds offer a way to generate both financial and environmental returns. But with speculation that UK interest rates could rise before Christmas and could hit 1% by next summer, savers may not rush to lock away their money for three years at just 0.65%.

Hagger said: “I appreciate the government is looking to fund essential green projects, but at a time of raging inflation where consumers are being squeezed financially from all angles, I can’t see people rushing to hand their cash over to the government at such a heavy discount.”

Sarah Coles, a senior personal finance analyst at investment firm Hargreaves Lansdown, said the rate was “such a disappointment”, and that NS&I was relying on savers who were willing to pay a price for going green with their savings.

She added: “You can get 0.65% on an easy access account (with limited withdrawals) from Coventry building society, so it’s easy to wonder why you’d bother tying your cash up for three years for the same return.”


This article was written by Rupert Jones from The Guardian and was legally licensed through the Industry Dive publisher network. Please direct all licensing questions to legal@industrydive.com.


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    Article originally published by The Guardian. Hargreaves Lansdown is not responsible for its content or accuracy and may not share the author's views. News and research are not personal recommendations to deal. All investments can fall in value so you could get back less than you invest.

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