- The rate on NS&I’s green bonds has increased significantly since the last issue
- Is it a good time to lock in a rate?
National Savings & Investments (NS&I) has released a fifth issue of its three-year 'Green Savings Bonds', increasing the interest rate as it tries to keep up with rivals.
The new issue will pay 5.7 per cent, up from the 4.2 per cent for the fourth round of fundraising, launched earlier this year. However, the rate falls shy of the best-buy three-year bond, which currently offers up to 6.05 per cent, according to research firm Moneyfacts.
The NS&I bonds fund green projects in a range of sectors, including transport, renewable energy, energy efficiency and adapting to climate change. Savers can invest between £100 and £100,000 per person per issue.
The first issue of green bonds launched in October 2021 with a rate of 0.65 per cent. Laura Suter, head of personal finance at AJ Bell, said such a steep increase reflected both the rise in interest rates in the savings market and how unpopular the bonds were with savers when they were first launched.
Suter warned that the market was changing quickly and it was difficult to know when was a good time to lock in a rate. “While we’re not expecting huge increases in Bank of England base rate this year, it is expected to climb further, so savers need to think about whether fixed rates will improve after they have locked in,” Suter noted.
NS&I’s green bonds are backed by the HM Treasury and the rate is guaranteed for the whole term. Interest on the bond is earned daily, added once a year and paid on maturity. At that point, it counts towards the saver’s personal savings allowance and is taxable if the allowance is breached, unlike NS&I's Premium Bonds.
