NS&I has today released a new Issue of Green Savings Bonds, and its interest rate is one percentage point lower than the previous Issue.
Issue 7 pays 2.95 per cent gross/AER fixed-rate over a three year term, while Issue 6 paid 3.95 per cent gross/AER. Until it was withdrawn on November 13, Issue 5 paid 5.70 per cent gross/AER.
The minimum investment in Green Savings Bonds is £100 and the maximum limit for each Issue is £100,000 per person.
NS&I said the amount of annual funding required through Green Savings Bonds is agreed between the Treasury and NS&I, alongside gilts issued by the Debt Management Office (DMO).
Green Savings Bonds are not included in NS&I’s Net Financing target, which is set by the Treasury each year.
Sarah Coles, head of personal finance at Hargreaves Lansdown, called the move a "harsh pruning" adding: “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.
“The fundraising target for these bonds is set completely separately to NS&I’s overall funding target, so this change has nothing to do with the fact the organisation is flush at the moment.”
It comes amid speculation the Bank of England could cut interest rates this year, from its 15-year high of 5.25 per cent.
The central bank hiked the base rate 14 consecutive times before holding it at its current level, since September 2023.
Having met its Net Financing Target for 2023/24 last year, NS&I announced a cut to the Premium Bonds prize fund rate earlier this month.
The government-backed savings provider said the rate would be reduced from 4.65 per cent to 4.40 per cent from the March 2024 prize draw.
The odds of winning a prize remain the same, at 21,000 to one per any £1 Bond number.
Andrew Westhead, NS&I Retail Director, said: “These changes reflect our requirement to strike a balance between the interests of our savers, taxpayers and the stability of the broader financial services sector.
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Andrew Westhead is the NS&I Retail Director
NS&I
"In a dynamic savings market, it’s important that our rates are set at an appropriate position against those of our competitors as we work towards meeting our annual Net Financing target.
“After these changes, the Premium Bonds draw in March is expected to pay out over 5.7 million tax-free prizes totalling more than £444million to savers across the UK.”
Investors must be aged 16 or older to purchase Green Savings Bonds.
The full amount they deposit will be held for three years and the money cannot be withdrawn during this time.
