NS&I launches a new issue of its Green Savings Bond

National Savings & Investments (NS&I) launches a new issue of its Green Savings Bond paying 4.20% AER

NS&I is on a roll!

January and February 2023 have been busy months for NS&I as for the third time in three weeks, the Treasury-backed savings provider has announced another rate hike, this time it’s the Green Savings Bond.

As with the previous rate increases, first to some of the variable rate accounts and then the reintroduction of the 1-year Guaranteed Growth and Guaranteed Income Bonds, this new issue of the Green Savings Bond is much more competitive when compared to the rest of the savings market.

Sign up to our FREE webinar on 28th February 2023 to hear our experts discuss the impact the uncertain world is having on retirement planning and importantly, what you can do to keep your future plans on track.

The Green Savings Bond Issue 4 is paying 4.20% AER fixed for three years on balances of between £100 and £100,000. This is a big increase from the last issue, which was paying 3% AER, available from August last year when the top 3-year bond on offer was paying 3.45%.

Since then, rates have continued to rise across the board and whilst this new Green Savings Bond only narrowly misses out on making it onto our best buy table, the top 3-year fixed rate bond is paying 4.45% with Gatehouse Bank, and you can even earn up to 4.35% if you were to opt for a shorter, 2-year bond with Union Bank of India (UK). In fact, NS&I has itself launched a new 1-year Guaranteed Growth Bond paying 4% AER on balances of between £500 and £1m, all of which is protected by HM Treasury.

However, by launching a much more competitive rate, this makes it clear that NS&I is hoping to increase the amount of cash in the Green Savings Bond, the proceeds of which are to be used to fund the Government’s green projects. The six key areas that the Government is planning to use this money for are:

Making transport cleaner
Renewable energy over fossil fuels
Preventing pollution
Using energy in a more efficient way
Protecting natural resources
Adapting to a changing climate

Of course this is all lip service if the money isn’t raised, and the earlier issues of the bond were clearly not hitting the spot - since the first issuance of the green bonds was launched in October 2021 paying just 0.65 per cent, only £300million of a £15billion target has been achieved, according to the latest publication of performance.

One 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, rather than being spread out over the term of the bond, even though interest is compounded each year. With 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, if you were to deposit £100,000 you will receive interest of £13,136.60 on maturity, which will be added to your taxable income at that point.

Unfortunately those early adopters of the Green Savings Bonds will not see an increase to their interest – they will continue to earn between 0.65% for Issue 1, 1.30% for Issue 2 and 3% for Issue 3, until the end of the term.

While this new issue of the Green Savings Bond is much more competitive and your money will be used to help with the Government’s green agenda, better rates can be found elsewhere. So take a look at Savings Champion’s Fixed Rate Bond and Sharia Fixed Term Account best buy tables to see what the best rates are.

Arrange your free initial consultation