NS&I has increased interest on fixed rate savings account

Martin Lewis offers advice on reinvesting in NS&I bonds

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Popularly known for their Premium Bonds, NS&I has launched the third issue of their green saver in August, offering a three percent interest rate gross over a three-year period. Savers will now be able to benefit from three percent interest, compared to the 1.3 percent NS&I offered in February.

It’s the third time the rate has been boosted since the bonds were first launched last October.

The government-backed savings bank says the changes will help savers fund vital green projects in the UK.

Accounts can be opened with a minimum deposit of £100 up to a maximum of £100,000.

If someone were to open an account with £10,000, their savings would be worth around £10,940 in three years – a profit of £940.

Their last launch was in February offering savers 1.3 percent, but rates have been rising across the board since the bank of England increased the base rate.

The Bond will be available to purchase on the NS&I website for those who are interested.

When Green Savings Bonds were first realised by NS&I last year they had a low rate of 0.65 percent AER over a three-year term.

According to data obtained in Freedom of Information request by This is Money, £102million was deposited into the bonds during the first four months at this rate. By comparison, savers deposited more than £2.5billion in NS&I’s premium bonds over the same period.

Take-up improved in February (£173million invested in a couple of months) when the rate doubled to 1.3 percent AER, even though the rate offered was still far below the competition.

Richard Fuller, economic secretary to the Treasury, said: “By increasing the returns on Green Saving Bonds to 3 percent we are demonstrating our commitment to green infrastructure in the UK.

“This will drive investment in projects to tackle climate change, improve sustainability and increase renewable energy capacity.”

This also includes making transport greener, using renewable energy over fossil fuels, preventing pollution, using energy more efficiently, protecting natural resources and adapting to a changing climate.

More information can be found on the NS&I website.

Sarah Coles, senior personal finance analyst, Hargreaves Lansdown, said the move has pushed NS&I “within shouting distance” of the most competitive three year rates.

She continued: “It gives the green light to new savers who want to tie their money up for three years and prioritise green credentials above the rate.

“However, those who locked in last October for a miserable 0.65 percent will be feeling green around the gills – and anyone eyeing up the new rate needs to consider whether they’ll feel the same in a year’s time.

“New savers could see this as a green light to get stuck into ethical savings. However, it’s worth thinking carefully before you do – so you don’t succumb to the green-eyed monster during the term.

“Three years may not be the most rewarding period to fix for.

“Right now you’re not getting paid an enormous premium for fixing for longer – because the swaps market influences the rates on offer, and the swaps market thinks that rates will rise in the short term and fall back later.”

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