- NS&I has cut its three-year Green Savings Bonds to 2.95%
- Previous issue paid 3.95% in November and 5.7% in August
- Rate has dropped by a huge 48% in just five months
National Savings and Investments has again cut the rate on its three-year fixed Green Savings Bonds, this time to 2.95 per cent from 3.95 per cent in the latest sign of savings deals heading south.
The account has seen a huge fall from 5.7 per cent in August 2023, when a new issue launched, to where it now stands at 2.95 per cent – a 48 per cent drop in just five months.
The rate was cut from 5.7 per cent to 3.95 per cent in November.
It means a saver opening the latest issue of the account putting in £10,000 would earn £321 less in interest across the three years than if they had opened the previous issue launched in November – and £899 less than August’s issue.
Trimmed down: NS&I cut the rate on three-year fixed-rate green savings bonds to 2.95%, down from 3.95% in November 2023 and 5.7% in August 2023
The new rate is significantly below the current top provider for a three-year bond – which is from Access Bank and pays 4.6 per cent.
A saver putting £10,000 in this account would have earnt £1,444 interest when the bond reached maturity.
Savers can also still bag more than 5 per cent on one-year fixes – including a best buy 5.16 per cent from Smartsave Bank.
When Green Savings Bonds were introduced in October 2021 they paid just 0.65 per cent.
This account was criticised by experts who said the rate was too low and the length of fix relatively niche.
The second issue, four months later, offered 1.3 per cent interest and it was then upped to 3 per cent in August 2022.
In February 2023, another boost took it to 4.2 per cent before rising to 5.7 in August 2023. The rate has fallen once since then to today’s low.
The minimum investment in Green Savings Bonds is £100 with a maximum limit of £100,000 per person per issue.
On the maximum balance of £100,000, the interest over three years – before tax – would roughly be £9,241.
On the 5.7 per cent rate between August and November 2023, £100,000 would garner £18,601 interest.
Interest worked out using the This is Money lump sum savings calculator.
NS&I says money saved in the bonds fund projects such as making transport greener, using renewable energy over fossil fuels, preventing pollution, using energy more efficiently, protecting natural resources and adapting to a changing climate.
Investors need to be aged 16 or over to purchase Green Savings Bonds from NS&I.
Unlike some NS&I products, these green bonds are also not tax-free.
NS&I says: ‘The interest you earn on Green Savings Bonds will count towards your taxable income in the tax year your bond matures.’
Sarah Coles, of Hargreaves Lansdown says: ‘These were always likely to face the business end of a pair of shears as the savings market gradually heads south.
‘However, the decision to cut so soon and so hard is disappointing. It raises the question whether we will see Green Savings grow, or whether the harsh prune has done too much damage.’
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