NS&I is perhaps best known for its Premium Bonds, providing Britons with a chance to win £1million each month. But the provider also has other savings options, and is taking another step to increase its offerings. Working in collaboration with the Government, the savings institution is to offer a Green Savings Bond to promote a more sustainable environment.
The interest rate, however, has not yet been announced by NS&I or the Government.
What savers do currently know, though, is that interest will be earned daily, added once a year on the anniversary of the investment, and paid out on maturity.
Interest will be earned on the account without deducting any tax at source.
But it is worth noting the interest is taxable, and so it will count in the customer’s Personal Savings Allowance in the tax year that the Bond matures.
Throughout a large proportion of the pandemic, NS&I led the pack on interest rates, holding out despite the tumbling of other providers.
However, ultimately it did make the decision to reduce its rates towards the end of 2020.
Some have said the Green Bond, then, could act as a litmus test for green savings, and for a potentially strong interest rate.
Laith Khalaf, financial analyst at AJ Bell, said: “The new NS&I bond the Chancellor is planning will give savers the option of a green home for their cash, but its success will likely be determined by the interest rate on offer.
“Savers showed they’re willing to vote with their feet when NS&I cut interest rates across a swathe of accounts last November, and if the green savings bond offers a paltry rate of interest, it might fail to ignite demand from the public.
“On the flip side, if the interest rate is too high, it will raise questions about the cost to the taxpayer, because the green savings bond is ultimately just Government borrowing by another name.”