NS&I releases new Green Savings Bond with competitive interest rate | Personal Finance | Finance

The fixed 4.2 percent rate is guaranteed for the whole three-year term, and interest is earned daily and added annually on the investment’s anniversary, and paid on maturity.

After first being announced during the Spring Budget in 2021, the first issue of Green Savings Bonds went on sale on October 22, 2021. The Bonds have since achieved sales of circa £288million as of March 31, 2022.

Laura Suter, head of personal finance at AJ Bell, commented: “The interest on NS&I’s green savings bond has increased again, as the Government-backed provider attempts to keep up with the savings war in the fixed-rate market. The three-year bond will now pay 4.2 percent interest, a significant leap from the three percent it’s currently paying.

“The rate now is a far cry from the paltry 0.65 percent interest paid on the accounts when they were first launched almost 18 months ago.”

However, she noted: “Customers who bought at launch will be frustrated that they are locked into that deal, with new customers able to get a far higher rate. Someone who put £5,000 into the bonds at launch will be earning just £32.50 a year in interest, compared to the £210 a year that a new customer will be getting now. If they had invested £20,000 that difference in interest jumps to more than £700 a year.”

While NS&I will rarely be the top rate in the market, it isn’t far off the market-leader for a three-year bond, which is paying 4.45 percent interest.

Ms Sutter continued: “Interestingly, the top rate on the market is also a green savings offering: Gatehouse Bank’s Woodland Saver, which plants a tree for every account opened. But savers are still sacrificing returns in order to have the backing of the UK Government, and it will be a personal decision on whether they think the lost interest is worth it.

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