NS&I to launch Green Bonds – everything the savings provider has said so far

Martin Lewis offers advice on reinvesting in NS&I bonds

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NS&I is perhaps best known for its Premium Bonds, providing Britons with a chance to win £1million each month. But the provider also has other savings options, and is taking another step to increase its offerings. Working in collaboration with the Government, the savings institution is to offer a Green Savings Bond to promote a more sustainable environment.

The product is set to be launched by NS&I later in the year, and the provider has already provided some details regarding what it is to involve.

The Bond is to offer savers an opportunity to support green projects through saving.

It will be offered at a fixed rate over a three year term, providing savers with stability in what is currently a somewhat volatile market.

The Bond is to be made available to individuals who are 16 or over, casting the net wide for savers who could benefit.

A minimum investment of £100 will be required, with Britons able to put away up to £100,000 each.

To be able to invest in this way, customers must possess a UK bank account.

This bank account must be capable of receiving Bankers’ Automated Clearing System (BACS) payments.

The fixed rate on the account will be guaranteed for the whole term.

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The interest rate, however, has not yet been announced by NS&I or the Government.

What savers do currently know, though, is that interest will be earned daily, added once a year on the anniversary of the investment, and paid out on maturity.

Interest will be earned on the account without deducting any tax at source.

But it is worth noting the interest is taxable, and so it will count in the customer’s Personal Savings Allowance in the tax year that the Bond matures. 

Ian Ackerley, NS&I Chief Executive, said: “We are delighted to be offering a new savings product on behalf of the Government and playing a key role in contributing towards the UK’s Green agenda.

“This exciting new Bond will be available to purchase from NS&I later this year.

“It will give UK savers the opportunity to contribute towards green projects to help make the world greener, cleaner and more sustainable.”

The launch of the Green Bond is one which is hotly anticipated, particularly once the interest rate is to be announced.

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Throughout a large proportion of the pandemic, NS&I led the pack on interest rates, holding out despite the tumbling of other providers.

However, ultimately it did make the decision to reduce its rates towards the end of 2020.

Some have said the Green Bond, then, could act as a litmus test for green savings, and for a potentially strong interest rate.

Laith Khalaf, financial analyst at AJ Bell, said: “The new NS&I bond the Chancellor is planning will give savers the option of a green home for their cash, but its success will likely be determined by the interest rate on offer.

“Savers showed they’re willing to vote with their feet when NS&I cut interest rates across a swathe of accounts last November, and if the green savings bond offers a paltry rate of interest, it might fail to ignite demand from the public. 

“On the flip side, if the interest rate is too high, it will raise questions about the cost to the taxpayer, because the green savings bond is ultimately just Government borrowing by another name.”

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