NS&I has made further cuts to the rate offered on the latest issue of the three-year Green Savings Bond, reducing the rate from 3.95% to 2.95% AER.
The 30% cut to issue 7 of the fixed rate savings bond, available now, comes fewer than three months after NS&I – the Government’s savings arm – slashed its issue 6 rate on Green Savings Bonds from 5.7% to 3.95% AER.
Today’s new issue follows the announcement that the Bank of England (BoE) will hold the base rate at 5.25% for the fourth Monetary Policy Committee in a row.
According to best buy data from Savings Champion, the highest rate available on a three-year fixed rate bond is 4.6% AER, offered by The Access Bank UK. The minimum opening balance is £5,000 and the account can be operated online or by post.
The minimum investment in Green Savings Bonds is £100, with a maximum limit of £100,000 per person for each issue.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “NS&I Green Bonds have been hit by harsh pruning. These were always likely to face the business end of a pair of shears as the savings market gradually heads south. However, the decision to cut so soon and so hard is disappointing. It raises the question of whether we will see green savings grow, or whether the harsh prune has done too much damage.”
Money invested in Green Savings Bonds, alongside gilts, helps finance green projects as part of the UK Government’s green financing framework.
“The fundraising target for these bonds is set completely separately to NS&I’s overall funding target, so has nothing to do with the fact the organisation is flush at the moment,” added Coles.
According to Coles, green gilts have always brought in the vast majority of the cash.
She added: “There’s a real risk that such harsh cuts will severely damage enthusiasm for the product. When you can still get 4.6% on a three-year bond elsewhere, you’d need to be a passionate believer in the Government’s green projects to settle for as little as 2.95% right now.”
