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Should you wait for the NS&I green bonds?

We look at the attractiveness of the National Savings and Investment green bonds and whether they’re worth waiting for.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

At the Budget earlier this year, the chancellor announced a new green savings bond.

The aim is to allow the public to play a part in the government’s projects to tackle climate change and finance green spending projects. It forms part of the objective to reduce greenhouse gas emissions to net zero by 2050.

But four months on from the announcement, we still don’t know the full details of what’s being offered.

What do we know?

The bonds will be available to buy online through National Savings and Investments (NS&I). They’ll run for three years and offer a fixed interest rate for that period. Because it’s a fixed rate product, you’ll get a guaranteed rate for the duration, but you won’t be able to access your money until it ends.

All money will be given to HM Treasury and held in a general account. The Treasury will use the money within two years and publish details about how it’s being spent and what the environmental benefits are.

Spending will be split across six key areas:

  1. Making transport cleaner
  2. Preventing pollution
  3. Renewable energy over fossil fuels
  4. Using energy in a more efficient way
  5. Protecting natural resources
  6. Adapting to a changing climate

What’s left to confirm?

Two key bits of information are still missing. The rate and the date.

We still don’t know what return savers are expected to get. But those expecting a competitve rate could be disappointed.

It’s worth remembering that by saving in these bonds, you’re lending money to the government. But NS&I isn’t the only place the Treasury can borrow from. They can also issue government bonds (gilts), which can be bought by individuals, companies or even the Bank of England. While there isn’t a comparable three-year gilt, a four-year gilt at a recent auction offered an average yield of 0.281%.

Looking at the wider market, the average rate on a three-year fixed term saving products is 0.64%. The best in the market is currently 1.36%. If the Treasury wanted to compete at that level, it would be a big cost to the taxpayer. That’s because they can raise money through cheaper means.

There’s also no clear date on when they’ll be offered, other than “later in the year”.

Are they worth the wait?

The choice of three years is slightly unusual. Figures from UK Finance show the amount of money being saved into fixed terms has been diminishing over the past decade, with the vast majority of savings being kept in instant access accounts. So it doesn’t reflect recent savings habits.

One-year fixed terms are popular, but there’s generally less demand the longer you fix for. Fixed terms run up to five or seven years, but because the rates are usually higher on longer terms, the government might not want to match them. That could be why they’ve settled for a rough midpoint of three years.

Ultimately the bonds could appeal to those who don’t need access to their money and want to make an environmental impact with it. But they might have to wait a while longer before they’re available, and it could come at a price.

What else can you do with your money?

There are other savings accounts in the market, although the rates aren’t always competitive.

If you want to use your savings to make a positive impact on society, there are other things you could consider aside from green savings accounts. Sharia banks and building societies offer an alternative way to make an impact.

Sharia banks often offer top rates, but with a slight difference. To comply with Sharia law, these banks can’t pay interest. Instead, you’ll receive an expected profit rate.

There are strict rules about what Sharia banks can do with your money and these can then have a knock-on positive impact. For instance, they can’t invest it in anything seen as harmful under Islamic law. This includes companies that support gambling, tobacco, alcohol or arms. Each bank will have an oversight committee which will govern what they deem to be Sharia-compliant.

Find out more about Sharia banking

Building societies are owned by their members as mutual organisations and can therefore pass benefits back to their customers or their local community. They often pay competitive rates on their savings products.

A simple way to boost your cash

With big banks paying paltry returns, lots of people will be looking elsewhere to get their cash working harder. The green bonds could be another option for savers – but will they be worth the wait?

Active Savings could help you get more from your cash and save on your terms. With one online account you can spread your money across savings products from lots of banks and building societies. This often includes Bank of London and The Middle East (BLME), a Sharia bank.

If you want to be able to access your money quickly, you could choose an easy access product. In one example you could get £102 more than you would from the worst high street accounts after a year, based on a £30,000 pot and the products paying interest annually. What you will actually receive will depend on your circumstances and the products available.

High street banks offer instant access accounts which allow immediate access to your money. Active Savings offers easy access products and withdrawals usually take one working day.

If you’re prepared to lock your money away for a period of time and earn even better returns, you can choose fixed terms from just a few months up to five years.

You could use fixed terms to set money aside for a particular goal. For example, to pay for school fees in three months time, or a tax bill in January. Just choose the product with your preferred length and make sure it matures before you need to pay the bill. You’ll likely get a better return than leaving the money sat in an easy or instant access account.


The best rates on Active Savings

Easy access

Up to
0.50% | 0.50%
(AER | Gross)

1 year

Up to
1.35% | 1.35%
(AER | Gross)

2 years

Up to
1.48% | 1.48%
(AER | Gross)

3 years

Up to
1.50% | 1.50%
(AER | Gross)

Easy access

Up to
0.50% | 0.50%
(AER | Gross)

1 year

Up to
1.35% | 1.35%
(AER | Gross)

3 years

Up to
1.50% | 1.50%
(AER | Gross)

Find out more

Please note the products above are some of our most popular, but more are available. Click the link above to see our full range. Products can be added or withdrawn at any time. Minimum deposit requirements apply to individual products. Easy access products pay a variable rate and fixed term products pay a fixed rate.

AER (Annual Equivalent Rate) shows what the interest rate/expected profit rate would be if it was paid and compounded once each year. It helps you compare the rates on different savings products. Once you have opened a fixed term product the rate won't change, but rates on easy access products can vary.

Gross means the rate without any tax removed. Interest/profits are paid gross. You are responsible for paying any tax due on interest/profits that exceed your Personal Savings Allowance to HM Revenue & Customs. Tax treatment can change.

This article gives you information to help you make the most of your money, but it isn’t personal advice. Please remember that inflation reduces the spending power of cash. If you’re not sure if a certain action is right for you, please ask for advice.

Cashback

Get an extra boost of £10 - £100 cashback as a thank you

Open an Active Savings account by 28 July, then add at least £10,000 by debit card and choose your savings product(s) within 60 days of opening your account to qualify for cashback as a thank you. If your balance drops below your cash offer qualifying amount within 6 months we may reclaim your cashback. Terms below.

You pay in Your cashback
£10,000 - £19,999 £10
£20,000 - £29,999 £20
£30,000 - £49,999 £30
£50,000 - £79,999 £50
£80,000 or more £100

Discover Active Savings

AER (Annual Equivalent Rate) – AER shows what the interest rate/expected profit rate would be if it was paid and compounded once each year. It helps you compare the rates on different savings products.

Gross – the interest rate without any tax removed. Interest/profits are paid gross. You are responsible for paying any tax due on interest/profits that exceed your Personal Savings Allowance to HM Revenue & Customs. Tax treatment can change.

Expected profit rate (EPR): Islamic banks offer an expected profit rate rather than interest on their savings products in order to comply with Sharia banking principles.



Active Savings Cashback Offer – what you need to know

1. This offer is available to anyone who opens a new Active Savings account between 23 June 2021 and 28 July 2021 inclusive (“the Offer Period”).

2. To qualify for the offer, you’ll need to fund your new account, with at least £10,000 by debit card, and to subsequently use this money to instruct us to add at least £10,000 to one or more savings products within that account. Both of these actions must be taken within 60 days of the opening of the account to qualify (“the Qualifying Period”). For the avoidance of doubt you can open an account with as little as £1 and still qualify for the offer, provided that your account is topped up to a balance of at least £10,000 and you use this money to instruct us to add at least £10,000 to one or more savings products. Both of these actions must be taken within 60 days of opening the account in order to qualify.

3. If you open an account within the Offer Period and also satisfy the criteria listed in clause 2, we will credit the cash hub in your account with a cash amount between £10 and £100, depending on the amount you add to one or more savings products. We will credit the cash amount within one month after your Qualifying Period. We’ll notify you by email once the cash amount has been added.

4. The value of the cash reward will be based on the total amount added to savings products within 60 days of the opening of the account. The value of the cash reward will also only be based on the amount added to your account by debit card during the Qualifying Period. The value of the cash reward will not be based upon any amounts added to savings products using cash held in a Fund and Share Account.

5. The cash reward shall be determined in accordance with the tiers identified in the table accompanying these terms and conditions.

6. It is not possible to combine the value of saving products chosen in accounts with different client numbers for the purpose of this offer. The maximum amount of cash you can receive under this offer is £100.

7. We reserve the right to reclaim the cash reward if the overall balance of your Active Savings Account drops below your cash offer qualifying amount within 6 months of the date of the qualifying deposit. We will notify you if we intend to reclaim the cash reward, and will claim it within 7 working days.

8. We reserve the right to amend, extend or withdraw this offer if necessary, including for legal or regulatory reasons or otherwise. If the offer closes early, all qualifying applications received up until this time will still be accepted. Details of any such amendment, extension or withdrawal will be posted on our website at www.hl.co.uk/savings.

9. This offer is not available to anyone who already has an Active Savings account.

10. You must not be an employee of any Hargreaves Lansdown Group company or a member of any such employee’s immediate family or household.

11. This offer is limited to one payment of up to £100 per client.

12. This offer will be governed by English law and, in participating, you submit to the jurisdiction of the English courts.

13. References in these terms and conditions to “Hargreaves Lansdown”, “our”, “us” or “we” are to Hargreaves Lansdown Savings Limited (company number 08355960), authorised and regulated by the Financial Conduct Authority (FCA Register number 915119), whose registered office is at 1 College Square South, Anchor Road, Bristol, BS1 5HL. References to the “Hargreaves Lansdown Group” are to Hargreaves Lansdown plc (company number 02122142) and its subsidiaries from time to time.

The Active Savings service is provided by Hargreaves Lansdown Savings Limited (company number 8355960). Hargreaves Lansdown Savings Limited is authorised by the Financial Conduct Authority under the Electronic Money Regulations 2011 with firm reference 901007 for the issuing of electronic money.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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