NS&I launches Green Savings Bonds: How do they measure up?

5 min Read Published: 23 Oct 2021

NS&I launches green savings bonds: How do they measure up?The world’s first Green Savings Bond went on sale today from National Savings and Investments (NS&I), giving people the chance to invest in the UK government’s projects to fight climate change. However, despite being hotly anticipated, its 0.65% interest rate has left many disappointed, and analysts have pointed out it simply does not compete with current bond market rates.

What are the new Green Savings Bonds?

NS&I launched the new Green Savings Bonds on Friday as part of widespread efforts to ramp up the UK’s commitment to battle the climate crisis. All money invested in NS&I is passed to HM Treasury and is used to help fund government spending, but the Green Savings Bonds are specifically designed to be put towards the government’s chosen green projects.

The money saved with the new bonds will be invested in numerous areas “to make the world greener, cleaner and more sustainable”, including: funding for zero-emissions buses; wind power and hydrogen research programmes; carbon capture and storage; the decarbonisation of hospitals, schools and other public buildings; forest planting and conservation; and flood defences and early warning systems.

It is hoped that the Green Savings Bonds will help reach the target - now written into law - that the UK must reduce its greenhouse gas emissions to net zero by 2050.

How do the Green Savings Bonds compare?

The Green Savings Bonds are a 3-year fixed-term product which are available to buy online directly from NS&I. You can invest between £100 and £100,000, but as they are fixed, you will not be able to access your money until it reaches the end of its 3-year term. However, you will still get the guaranteed fixed rate of interest for the whole 3 years, so if you are able to wait until the end of the term then you will reap the benefits of the consistent interest.

However, at just 0.65%, the Green Savings Bonds’ interest rate is significantly below some of the best fixed-rate bonds on offer elsewhere on the market. JN Bank currently holds the top spot for the best 3-year fixed-rate bond with its 1.81% ‘Fixed Term Savings Account - 3 years’, closely followed by raisin’s ‘3 Year Fixed Term Deposit’ and Zenith’s '3 Year Fixed Term Deposit’ both at 1.78%. Even the fifth highest UK rate, from Close Brothers Savings’ ‘3 Year Fixed Rate Bond’, is well above NS&I’s new offering at 1.65%.

The Green Savings Bonds considerably lag behind the rest of the fixed-rate bond market, but for many, it is likely to boil down to whether or not they want to invest their money sustainably. Opt for the new bond and you'll be sacrificing a better rate to contribute towards the fight against climate change, improve the UK’s green infrastructure, and fund the growing renewable technology sector.

Alternatively, if the less-than-stellar interest rate isn’t for you, head over to our weekly round-up of the best fixed-rate bonds on the UK market to see the alternatives.

If you’re not impressed by the interest but still want to help contribute to green projects, read our article “How can I invest ethically and what are the costs?” or check out “Which are the best ethical Stocks and Shares ISAs?”.

The best 3-year fixed-rate bonds

Provider JN Bank raisin Zenith raisin Close Brothers Savings
Name Fixed Term Savings Account - 3 years 3 Year Fixed Term Deposit (Provided by Hoist Finance) 3 Year Fixed Term Deposit 3 Year Fixed Term Deposit (provided by Isbank) 3 Year Fixed Rate Bond
Interest Rate 1.81% 1.78% 1.78% 1.75% 1.65%
Minimum Opening Balance £1,000 £1,000 £1,000 £1,000 £10,000
How to manage the account Online Online Email, Post Online Online, Telephone
How to apply Online Online Online Online Online
Financial Services Compensation Scheme Own Licence Own Licence Own Licence Own Licence Own Licence

Source: savingschampion.co.uk, Date: 22/10/2021.