NS&I launches new range of bonds paying up to 6.2%

National Savings & Investment (NS&I) has once again increased the rates paid on some of its products, this time propelling it into the top of the best buy tables. The recent rate hikes from NS&I include a new issues of its Green Savings Bond, which is jumping from 4.2% to 5.7% AER and a new issue Guaranteed Growth Bonds and Guaranteed Income Bonds, which are now paying  a best buy 6.2% AER (6.03% monthly gross for the Guaranteed Income Bond) - the highest rates offered on these 1-year bonds since they first went on sale back in 2008. 

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What is the Green Savings Bond?

The Green Savings Bond announced in the 2021 Spring Budget and released on 22nd October is a three-year fixed savings account. Issue 5, the latest issue available, is paying 5.7% AER, fixed. This rate is currently available if you’re willing to lock your money away for the full three years with a deposit of between £100 and £100,000.

What separates the “green” savings bond from a regular savings bond is how the invested money is used. Funds raised from investments into the green bond go solely towards environmentally conscious projects such as electric vehicles, public transport, offshore wind farms and solar energy in homes. It is hoped the green bond will aid the Government in reaching its “net-zero by 2050” carbon emissions goal, as well as providing financial motivation for everyday investors to get involved in ethical financing.

When NS&I initially launched the Green Savings Bonds back in October 2021, there was little to get excited about, paying just 0.65% AER. So other than supporting green causes, you were getting little back on your return. Fast forward to today and the recent increase is multiples higher than the rates that were competitive only a couple of years ago, which really shows just how much of a comeback bonds are making amidst the interest rate hikes in the UK.  

One important thing to be aware of with this bond is that there is no option to take an income at all, so all of the interest earned will count towards your taxable income in the year the bond matures -even though interest is compounded each year. This is in contrast to many fixed rate bonds where interest is spread out over the term of the bond.  With many other bonds, if you at least have the option to choose to have the interest paid out or compounded, the interest is deemed to be paid annually and therefore should be added to your taxable income each year. So, savers need to be aware that with the Green Savings Bond, they could breach the £1,000 Personal Savings Allowance (PSA) with as little as £5,700.

What are the new Guaranteed Growth & Guaranteed Income Bonds

The popular Guaranteed Growth Bond and Guaranteed Income Bonds are similar in that they pay a fixed rate for a fixed term, However, it’s important to know the differences between the two when thinking about your personal investment.
The 1-year Guaranteed Growth Bond earns a fixed rate of interest of 6.20% for 1 year, on balances of between £500 up to £1million, and no access is permitted until the bond matures. The Guaranteed Income Bond pays 6.03% interest on your investment monthly but similarly to the Guaranteed Growth Bond, you cannot access your original investment until maturity.
 Both of these bonds must be opened online.

“Today, we are able to offer new Issues with an improved interest rate for customers wanting the certainty of knowing how much they will be earning on their savings for one year.” – Dax Harkins, NS&I chief executive commented.

At The Private Office, we can not only offer you unbiased advice when it comes to sustainable saving and investing, but we lead through example by donating a quarter of our future value of the business to environmentally friendly causes, such as the Trillian Trees Project
If you want to find out more about how we can help you, why not give us a call on 0333 323 9065 or book a free non-committal initial consultation with one of our Financial Advisers.

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This article is intended for general information only, it does not constitute individual advice and should not be used to inform financial decisions.

The accounts and rates mentioned in this article are accurate and correct as of 08/09/2023 and can be withdrawn by NS&I at any time.