NS&I Green Savings Bond
At just 0.65%, is it ever worth getting?
The Treasury has launched a Green Savings Bond through National Savings and Investments (NS&I) that lets savers help fund green infrastructure projects. Yet it only pays 0.65% AER fixed over three years – here's all you need to know.
What is the Green Savings Bond?
Announced in the 2021 Spring Budget and launched on 22 October 2021, the Green Savings Bond is a new three-year fixed savings account available from NS&I. The funds it raises from UK savers will be used to help environmentally-focused projects get off the ground – all part of the Government's efforts to hit net-zero carbon emissions by 2050.
These projects include building offshore wind farms, accelerating the transition to electric vehicles and revamping homes and public transport. However, your savings are safe as you're not reliant on these green projects to be successful to ensure you get your money back.
How does the Green Savings Bond work?
It operates like a normal three-year fixed savings account, so the amount you save is locked away until the account matures. In return, it pays a fixed 0.65% AER interest rate. So at the end of the three-year term you'll receive your lump sum savings back in full, plus the interest. Here's a full lowdown:
|Interest rate||0.65% AER, fixed for three years (i)|
|Who can get it||Anyone aged 16+ (available as sole and joint accounts)|
|How to open||Online, available until at least 22 January 2022|
|When can I get the interest?||At maturity|
|Is interest taxable?||Yes, it will count towards your Personal Savings Allowance, though most savers won't pay any tax|
|Are my savings safe?||Yes, NS&I is backed by the Treasury, so you get 100% safety for your cash|
'Normal' savings can easily beat the NS&I Green Savings Bond
The Green Savings Bond's 0.65% can easily be beaten by other savings products on the market. We've the full best buys later in this section, but first here's MoneySavingExpert.com founder Martin Lewis' view:
'This is quite simply not an account that those whose focus is maximising interest will look at'
“The Chancellor must really hope that the nation is wearing green trousers as the rate being offered is pants.
“It’s only paying 0.65% interest a year, a paltry amount compared to what’s available on the open market – it pays less than the top easy-access savings account, yet with the Green Bonds you have no access to your money and it’s locked away for three years.
“The right comparison is with the top three-year fixed savings account and that pays nearly three times what the Green Bonds are paying. And while NS&I is as safe as it gets, with all UK regulated savings institutions you are protected up to £85,000 per person, so that has no practical advantage for most. Though those with very large amounts of long-term savings using NS&I for safety may want to use this Bond, as it provides higher rates than NS&I's alternative accounts.
“This is quite simply not an account that those whose focus is on maximising interest will look at – it’s likely only something those willing to sacrifice substantial interest in order to support what they hope will be green causes are likely to consider.”
Get up to 1.81% for three years with 'normal' savings accounts
If you're not too bothered about being green, you can currently beat the Green Savings Bond's interest rate of 0.65% with an easy access account from Cynergy Bank paying 0.66%. Whilst the rate here is variable, so could go down as well as up, you won't need to lock away your cash for three years.
And if you can lock money away for the full three years, you can earn 1.81% also with JN Bank - that's nearly three times the rate you'd earn with the Green Savings Bond over the same time period.
For more on savings accounts, including daily-updated rates, see Top Savings Accounts.
NS&I's savings bond is worth considering if you want green savings
If green is a priority, then NS&I does quite well compared to other 'green' savings rates, as the table shows.
It's difficult to say with certainty which banks are green and which are not, as everyone has their own interpretation of what that means. On MoneySavingExpert, we've used ratings from Ethical Consumer, who rank financial services providers on a range of things including their green credentials, transparency, and what sort of companies the bank invests in.
Triodos Bank and Ecology Building Society are the only two financial services providers to score more than 15/20 in Ethical Consumer's ratings (for reference, most high-street banks score less than 10). Both providers are committed to investing all of savers' cash into socially or environmentally conscious causes. Yet we've included a few other options where banks are not yet rated and where they are making efforts to help the environment.
Note, all accounts have the full £85,000 FSCS savings protection.
|NS&I Green Savings Bond||Three-year fixed bond paying 0.65% (min £100)||The funds it raises will be used by the Government to help environmentally-focused projects get off the ground, for example building offshore wind farms or revamping homes and public transport.||Not applicable (2)|
|Triodos||- Easy-access at 0.15% (min £1)
- Easy-access ISA at 0.2% (min £10)
- One-year bond at 0.4% (min £500)
|Invests in a range of companies that have a positive impact on the environment in order to 'support a sustainable future'||16/20|
|Ecology BS||- Easy-access at 0.1% (min £25)
- Easy-access ISA at 0.3% (min £25)
- 90-day notice at up to 0.55% (min £500)
- Regular Saver paying 0.8% (min £25)
|Provides lending to support sustainable projects and properties, with £43.5m lent for these purposes in 2019.
|Tandem||Easy access saver paying 0.55% (no min)||Through green lending initiatives, helping to make UK homes more sustainable||Not yet rated|
|Oxbury Bank||One-year fixed rate bond paying 0% (min £1,000)||Uses savings interest of 0.7% to fund the planting of Woodland Carbon Code compliant trees||Not yet rated|
One other to consider... Gatehouse Bank offers a range of fixed rate savings bonds and cash ISAs and it usually pays close to market-leading rates. In addition, Gatehouse will plant a tree for each account opened. However, we've not included it in the table above as it scored an unexceptional 7/20 in Ethical Consumer's rankings.
If you do want to open an account with Gatehouse Bank, it's worth noting that it only offers sharia accounts. These pay expected profit rather than guaranteed interest, but we don't know of any instance in the past when it hasn't paid the expected rate.
You could get higher interest rates and use them to go green
If you want to help the environment but don't want to commit to such low rates, you could put your money in to a 'normal' savings account and then use the cash you get back from the higher rate of interest to go green. One way to do this would be to use the money to reduce your carbon footprint by putting it towards a carbon offsetting scheme.
Yet this may not be as green as going for the ethical options above. Most banks, when you save with them, will lend your cash out - it doesn't just sit in a vault waiting for you to withdraw it. And, with many banks, you won't necessarily be aware of just what it's lending your money for. It could be for mortgages, it could be for a car loan, but it could also be to an oil company or an airline. And you just don't know.
If you're comfortable with that, this self-offsetting route could work for you. If not, then you're likely better getting the lower returns from the 'green' banks or building societies above, and the peace of mind that comes with knowing your money's doing some good.
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