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Earn up to 4.4% in the brave new world of green savings accounts

Emma Lunn
Written By:
Emma Lunn
Posted:
Updated:
20/04/2023

If you’re worried about how your money is invested or you want to play a part in saving the planet, ‘green’ savings accounts offer an eco-friendly home for your cash.

Given the UK government’s pledge to cut its greenhouse-gas emissions to net zero by 2050, there are now several providers which market green savings accounts. These deals usually earmark your savings for projects like greener transportation, or simply form part of the provider’s environmentally focused ethos.

Moneyfacts has analysed how the interest rates on green savings accounts compare to rival deals.

NS&I’s Green Savings Bonds

In 2021, the Government-backed National Savings and Investments (NS&I) launched its three-year fixed Green Savings Bond.

Money deposited with the NS&I is used for public spending, like building roads and maintaining hospitals. But its Green Savings Bond differs from its other accounts in that it is used to fund government-led green projects.

These include funding solar and wind power, carbon capture and storage, or forest planting and conservation, among other uses.

It currently offers a rate of 4.20% AER, which is some way off the best rate in the sector at 4.68% AER which is offered by Al Rayan Bank.

The NS&I’s bond is also bettered by Paragon Bank’s three-year fixed green savings account, which offers a rate of 4.35% AER. If you opt to save with this provider then your savings will be used to support Paragon Bank’s green lending products, like buy-to-let mortgages for energy efficient homes.

Both accounts remain above the average for the sector, which sat at 4.01% AER at the beginning of April.

Gatehouse Bank’s fixed rate bonds

Gatehouse Bank’s offers a range of Woodland Saver accounts. These can also form part of your ISA allowance and operate slightly differently to the NS&I’s Green Savings Bond.

Instead of funding green initiatives, Gatehouse Bank will plant a tree in a certified UK woodland for each account you open or renew.

The entire Woodland Saver range betters its respective Moneyfacts average rate for April and, in some instances, are some of the best deals on the market.

The 1 Year Fixed Term Woodland Saver pays 4.35%, while the two, three, four and five-year products all pay 4.4%.

As an alternative to this selection, Triodos Bank offers one and two-year fixed rates, while the State Bank of India offers green three and five-year fixed deals.

The State Bank of India’s accounts exceed its respective average returns for April, while Triodos Bank, which just has a green ethos, offers less than these average rates.

RCI’s pledge for greener transport

If you’re in the market for a variable account instead, then you could consider a notice account from RCI Bank UK.

This deal now offers the top rate for accounts requiring a notice period of 30 days or less and pays 3.3%.

“Deposits on our green E-Volve Saver account [are] used exclusively to fund loans that have helped people buy or hire electric vehicles,” said Tafari Smith, head of savings at RCI Bank. “This has helped motorists avoid emitting more than 6.4 million kg of CO2 in 2022 when driving. Achieving that level of CO2 reduction would require the planting of 256,469 mature trees.”

Otherwise, for an easy access account, Tandem Bank offers an Instant Access Saver at 3.15% AER.

Like Triodos Bank, Tandem Bank has a green ethos and, by opening its Instant Access Saver, you’ll be supporting its eco-friendly initiatives. These include making home improvements which make UK homes more environmentally friendly.

Better-paying easy access accounts do exist – the top easy access rate is 3.55% from Chip – but Tandem Bank’s interest beats the typical return in this sector.