Details of a new savings product which will fund the UK government’s environmental projects have been revealed – with one key factor kept under wraps.
Anyone aged 16 or over will be able to put between £100 and £100,000 into green savings bonds from the Treasury-backed savings organisation National Savings and Investments (NS&I).
Money will be locked in for three years but, significantly, the interest rate – which will be fixed for the term – has yet to be announced.
The bonds, likely to go on sale in September, will offer people the chance to invest in eco-friendly projects such as renewable energy and green transport as part of the government plans to hit net-zero carbon emissions by 2050.
NS&I Chief Executive Ian Ackerley 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 nsandi.com later this year and will give UK savers the opportunity to contribute towards green projects to help make the world greener, cleaner and more sustainable.”
NS&I, the provider of premium bonds, has been criticised for its customer service during the coronavirus pandemic. However, the fact that the bonds are government-backed could make them more attractive than banks for savers because they will be fully guaranteed. Up to £85,000 per person, and per bank, building society or credit union is guaranteed for savers elsewhere under the Financial Services Compensation Scheme.
With the interest rate still under wraps, investors will have to wait to see if they offer a competitive option for putting their money to work sustainably.
Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: “The N&I Green Savings Bond will let savers put their money where their mouth is, and support sustainable projects with their savings. But while it’s a useful addition to the growing world of green savings, there are already accounts with similar aims on offer. What really matters here is the rate, and NS&I is remaining tight-lipped on that front.
“So far, all we know is that the bond will support projects that aim to tackle climate change and make the environment greener and more sustainable – like green transport, renewable energy, and energy efficiency. This isn’t enormously far from the aims of existing ethical savings accounts from the likes of Triodos Bank.”
Money invested in the bonds will be held in a general account by the Treasury, which has committed to releasing these funds to green projects within two years. It will report on how the money is spent, and the environmental benefits achieved.
Investors must have a UK bank account capable of receiving BACS payments. Interest is earned daily and added once a year on the investment’s anniversary, and paid on maturity.
The interest earned won’t be taxed at source, but it will count towards the investor’s Personal Savings Allowance in the tax year that their bond mature.