NS&I has reduced the interest rate of its Green Savings Bonds to 2.95% AER for a three-year term, potentially diminishing its allure for eco-conscious investors in comparison to higher-yielding options.
National Savings and Investments (NS&I) has launched a fresh issue of its Green Savings Bonds in the UK, with a reduced annual equivalent rate (AER) of 2.95% for a three-year term. This new rate is a decrease from the previous offering that paid 3.95% AER. The Bonds are designed to allow savers to directly fund environmentally friendly government projects, aligning with the UK Government Green Financing Framework.
Unlike other NS&I products, Green Savings Bonds have a distinct purpose and are not included in the organisation’s annual net financing target dictated by the Treasury. Savers can invest a minimum of £100 and a maximum of £100,000 per individual for each issue. However, investors must commit to locking in their funds for the entire three-year period, as early withdrawal is not permitted.
With the announcement, concerns have surfaced regarding the Bonds’ future attractiveness to investors due to the rate decrease. For instance, Sarah Coles from Hargreaves Lansdown voiced concerns that the steep rate cut could suppress growth and interest in these green investments. Coles pointed out that the new rate is considerably lower than the 4.6% offered by other three-year investment bonds available in the market.
The effect of the rate reduction on the appeal and subsequent uptake of the Green Savings Bonds remains to be assessed.
