With details about the National Savings and Investments’ (NS&I) Green Saving Bonds being revealed last week, we’ve looked at whether these bonds are a good option for savers and the alternatives already available on the market.
What is the Green Savings Bond?
During the spring budget it was announced that a new savings account will be launched to consumers that will use funds to invest in green projects. Last week NS&I revealed details about its Green Savings Bonds, which will be a three year fixed rate bond that will be opened and managed online. Interest will be earned daily, added once a year and paid on maturity. The bond will be available to those aged 16 and over and will require a minimum deposit of £100 to a maximum of £100,000.
Although details about the bond have been announced, it has not yet been stated when the bond will be launched or the interest rate that will be offered. Without knowing what interest rate will be set there is no way of determining how competitive it will be within the three year fixed rate bond savings chart. Positioning the bond on a three year term does, however, suggest that the Government it being cautious with this account as it is avoiding the more popular one and two year fixed rate bond charts, as well as not having to compete with higher rates within the five year bond chart.
Saying this, the fact that this is a Government-back bond and pledges to invest in green projects could mean that savers will be interested in the account even if it does offer an uncompetitive rate. Rachel Springall, finance expert at Moneyfacts.co.uk, said: “It will be interesting to see what rate of interest the green bonds may pay but as there is trust in NS&I due to its Government-backing, these bonds may well be popular with savers who are happy to lock their money away. Ethical investing is a hot topic and savers may even choose an ethical savings vehicle over a better interest rate if they want to support ethical ventures.”
As well as this, once the Green Saving Bond is launched, savers may find that they need act quickly to open the account as previous bonds launched by NS&I have been rapidly withdrawn. “In 2015 NS&I launched ‘pensioner bonds’ one of which was a three year bond paying 4% and the other was a one year bond paying 2.80%,” explained Springall. “These bonds were only available for a few months and were very popular. NS&I experienced strong demand for these bonds, both with their website and helpline at the time, so it would be a good idea for any savers who are interested in the green bonds to sign up to any alerts and act fast once they become available and if they are an attractive option to them.” Unlike the Green Savings Bonds, the pensioner bonds were only available to those aged 65 and over and had a maximum investment of £10,000 and required a minimum investment of £500.
What green savings accounts are already available?
The highest paying fixed rate bond that has a green incentive currently available is Gatehouse Bank’s Fixed Term Green Saver. There are one, two, three and five year versions of this bond, all of which pay competitive expected profit rates in their charts. The bonds all have the incentive of Gatehouse Bank planting a tree in a UK woodland when the account is opened and funded.
A green savings alternative to fixed rate bonds is Tandem Bank’s Green Instant Access Saver. This easy access savings account pays 0.40% AER and the bank states that money deposited will support its green lending initiatives and will help make UK homes more sustainable and environmentally friendly.