The rate has finally been revealed for the NS&I green bond – and it’s not great.
There was excitement earlier this year when the government announced some ethical savings bonds where the funds you saved would go to green spending initiatives. However that was tempered by a lack of detail.
We now know that these 3-year bonds will pay a paltry 0.65%. That’s the same as the best easy-access account right now and a third of the top-paying fix of the same length.
But if you want your money to do good, can you put it anywhere better?
What is the Green Savings Bond?
The bond is provided by National Savings & Investments (NS&I) with the aim of getting us to lend money to the government for green public spending.
You can deposit up to £100,000 into the bonds which will be then locked away for three years. You’ll get an interest rate of 0.65% fixed for that time.
The bonds will be open for at least three months (so late January 2022).
NS&I Green Savings Bond
|Account name||Green Savings Bond|
|Interest rate||0.65% AER fixed|
|Length of fix||Three years|
|Min monthly deposit||£100|
|Max amount earn interest on||£100,000|
|Withdrawals||None until term ends|
Is the Green Savings Bond any good?
If you’re looking just at the rate, then no. It’s a bad savings account. Not the worst, but you can certainly beat it very easily.
For every £10,000 saved in the account, you’ll earn £65 a year. But the best account for the same three year period will earn you £181 a year. So that’s a total of £348 less over the three years.
And the more you save, the bigger the difference. Save £30,000 and you’re losing out on more than a grand. Put in the full £100,000 and it’s a huge £3,480.
In fact you could get the exact same rate without locking your money away right now, giving you the flexibility to access the cash and move it if rates go up.
And with the recent speculation that the Bank of England will increase base interest rates later this year and again next year to combat inflation, there’s a good chance they will.
So if you’re after the account with the biggest payout, then you should look elsewhere (here’s my list of the best savings accounts).
Of course, lots of people will be attracted to the account because of ethical concerns. They want their money to do good, not bad (as your money could well do if held with the big high street banks).
Well yes, you might decide to take the financial hit to achieve this – but the Green Savings Bond isn’t the only ethical option.
Alternative ethical savings accounts
To start it’s best to talk about what is an ethical savings account. You’ll want to look for accounts that follow one or a combination of the following:
There are some providers who are proactively focused on green initiatives, and others that state they won’t lend your money to companies who aren’t green.
Some accounts might be Sharia-compliant, meaning the bank won’t invest in companies involved in things like tobacco, firearms, alcohol and gambling.
And then there are the building societies where the money you save with them is used for mortgage lending – so by default they can’t go towards oil, arm or other issues you don’t agree with.
Here’s my pick of account available right now:
Top green savings accounts
Ecology Building Society (Regular saver) – 0.8%
This is a variable rate regular saver from Ecology paying 0.8% with a minimum of £25 and a maximum of £250 a month.
Tandem (easy access) – 0.55%
This Instant Access Saver offers 0.55% from Tandem. The bank says it will support green lending initiatives. You can only open it via the Tandem app.
Top building society savings accounts
Nationwide FlexDirect (Current account) – 2%
This current account gives 2% on up to £1,500. It’s fixed for one year. You can also open the 1% Start to Save regular saver.
Coventry Building Society (Regular saver) 1.05%
This regular saver from Coventry Building Society doesn’t require a current account so anyone can open it. The rate is variable so it can change at any time (and dropped mid-Feb from 1.3%). You can however pay in a decent £500 a month.
Coventry Building Society (Four access saver) 0.65%
This is almost an easy access account as there are four withdrawals a year allowed (min £1 / max £250,000). It pays 0.65% AER variable.
Nationwide (triple access) – 0.45%
You can only make three withdrawals a year, but you can be assured your money in this Nationwide is better invested than with the other major lenders.
Top Sharia savings accounts
Paying interest isn’t allowed in Islam, so a Sharia-compliant savings account instead promises a return on the money saved – an expected profit rate. Though technically this means the rate isn’t guaranteed, it’s not happened yet. They’re open to everyone, not just Muslims.