Last week NS&I announced more details on its Green Savings Bonds which were initially reported in the March budget. And analysts and advisers have rightly expressed their disappointment.
NS&I Green Savings Bonds have a fixed term of three years, which means you can’t access the money in them until the term ends, but only pay 0.65% interest. . As a general rule, the longer you lock in your money the better the rate you should get, but that’s not the case here.
Interest rates are expected to rise over the next three years, so if you tie up your money at 0.65%, you could be missing out on potentially higher interest rates. And “you pay a real price, because lower rates in times of higher inflation mean that you are very likely to lose some of the purchasing power of your money over the three-year period,” says Sarah Coles, senior personal finance analyst. To Hargreaves lansdown. “You have to be clear that you will be happy to retire it in three years, unable to buy the same things your money would stretch until today.”
There are many other three-year savings accounts that pay better rates, two of which have rates almost three times as high at 1.81 percent, according to moneysupermarket.com to October 26. These are Bank Al Rayan 36 month fixed term deposit in which you must put a minimum of Â£ 5,000 and JN Bank 3 year fixed term savings account in which you need to put at least Â£ 1000.
There are a number of other three-year savings accounts offering not much less, with four payout rates ranging between 1.75 and 1.78%, and five between 1.6 and 1.65%, according to moneysupermarket. .com as of October 26.
If you’re worried about your money staying at a fixed rate for three years, there are two-year savings accounts with interest rates up to 1.76% and one-year savings accounts with rates. up to 1.45%.
But NS&I Green Savings Bonds are potentially attractive if you want to invest your savings in green infrastructure. The money invested in these will go into a Her Majesty’s Treasure general account and be spent on green projects within two years. These are six key areas: making transport cleaner, using renewable energy to help the UK move away from fossil fuels, preventing pollution, using energy more efficiently, protecting natural resources and adapt to climate change. The government will release more details on how the money will be spent and what the environmental benefits are.
But there are ethical and green alternatives. For example, Gatehouse Bank 3-year fixed-term Green Saver, a Sharia-compliant bank account, offers a yield equivalent to an interest rate of 1.78%. If you are worried about having your money locked in for that long, you can instead place it in Gatehouse Bank Fixed Term Green Saver for a yield equivalent to 1.3 percent interest rate, 18 months Fixed Term Green Saver for a yield equivalent to an Interest rate of 1.4 percent, or 2-year fixed-term green savings for a return equivalent to an interest rate of 1.6 percent.
For every Gatehouse Green Saver account opened or renewed, the company funds the planting of a tree in one of the four UK forestry projects.
But the question here is, like with an ethical savings or investment, does this match your ethics? If not, it’s probably not correct.
In the case of Gatehouse Bank, although tree planting is a very laudable cause, in terms of scale and impact, it is unlikely to be as important as the many projects that NS&I Green Savings Bonds will fund. .
Other ethical options include Triodos Bank One-year ethical savings bond, which pays only 0.4% interest. But Coles suggests that “if rates go up in the next 12 months, you might move on to a more rewarding place when this ends.”
Tandem Bank, meanwhile, offers 1.15% on his one-year fixed saver, 1.41 on his 2-year fixed saver and 0.55% on his instant access saver.
One argument in favor of NS&I Green Savings Bonds is safety. NS&I products are 100% backed by the UK government, regardless of how much you invest. Most UK bank account providers are covered by the Financial Services Compensation Scheme, so if they fail, savers of their products receive compensation of up to Â£ 85,000 per person per institution.
One way around this limit is to have no more than Â£ 85,000 in banks run by the same company. But savers can put anywhere from Â£ 100,000 to Â£ 100,000 online in NS&I Green Savings Bonds and there are other NS&I products, although green projects are not targeted.
|Three-year savings bonds with the highest interest rates|
|Account||Interest rate (TEA *)%||Minimum deposit (Â£)|
|Al Rayan Bank 36 Month Fixed Term Deposit||1.81||5,000|
|JN Bank 3-Year Fixed-Term Savings Account||1.81||1000|
|Gatehouse Bank 3 Year Fixed Term Green Saver||1.78||1000|
|Zenith Bank 3 year fixed term deposit||1.78||1000|
|QIB UK 3 year fixed term deposit||1.77||1000|
|Source: moneysupermarket.com, 10/26/21|