NS&I Green Savings Bonds interest rate – Sunak warned of ‘product flop’

Martin Lewis offers advice on reinvesting in NS&I bonds

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The new three year green savings bonds are due to be launched by the end of the year and excitement has been building as it’s a new opportunity for savers who would like to help the planet while also making a profit.

Although the bonds haven’t been launched yet, industry experts are speculating that the Chancellor could be preparing to make an announcement.

Laith Khalaf, head of investment analysis at AJ Bell, said it’s a big decision.

“The Chancellor has committed to launching a green NS&I savings bond this year, and we could well see Rishi Sunak announcing the interest rate in this Budget, in much the same way George Osborne did with the NS&I Pensioner Bonds in 2014,” he said.

He added that the three year green savings bond, backed by the Treasury, would be a welcome addition to the UK cash market, as it would give savers “a place to park their money and do their bit for the environment at the same time”.

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However, he added that the question of what rate to pay is “politically charged”, too low and it could disappoint savers, too high and it would raise questions of who’s paying for it.

Mr Khalaf explained: “Too little, and it will disappoint savers, and could lead to a product flop, particularly when the potential for interest rates to rise is already likely to deter savers from locking their money away for three years.

“Too much, and clearly questions will be asked about the cost to the taxpayer, particularly when taxes and the cost of living are on the up, and Exchequer resources are stretched to the limit.

“The Government could borrow money for its green infrastructure spending plans through the gilt market instead of through NS&I.”

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Mr Khalaf warned that if the rate is too good it could open up the Chancellor to accusations of wasting taxpayers money at a time when funds are extremely tight.

He added: “The current rate of Government borrowing for a three year gilt is just 0.7 percent, and that compares to an interest rate of 1.8 percent on some of the best deals for three year savings products on the cash market.

“On the £15 billion of borrowing the NS&I will be raising through the green bond, closing that rate gap could end up being a significant cost to the taxpayer.

“If the Chancellor offers a market-leading rate, he will be open to accusations of buying green credentials with taxpayers’ money.”

Demand for green savings and investment products is soaring and for those with at least £100 to invest, NS&I Green Savings Bonds will enable people to go green this winter.

Every pound of peoples’ money that is invested into these green bonds will be passed onto HM Treasury to spend on projects that help the environment.

As part of the Government’s plans to meet net-zero carbon emission targets by 2050, some of the funding will be spent on zero emission buses to help reduce harmful emissions caused by petrol and diesel vehicles.

There will also be a focus on projects that help the UK move away from its reliance on fossil fuels in favour of renewable energy.

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On its website NS&I said: “HM Treasury plans to allocate an amount equivalent to the proceeds raised from Green Savings Bonds, to its chosen green projects, within two years.

“The Government will publish details about how the money is being spent and what the environmental benefits are, so you can see the difference you’re making.”

Those interested will be able to invest between £100 and £100,000 for a minimum period of three years.

Potential investors will need to have an emergency fund saved elsewhere because the money can’t be accessed before the period ends.

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