NS&I’s Green Savings Bonds branded a ‘flop’ after savers offered ‘paltry’ interest rate | Personal Finance | Finance

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Green Savings Bonds allows savers in the UK to financially support environmentally friendly projects. Money that is placed into the product is used to help the transition to a low carbon economy and address climate change. While NS&I launched the account to much fanfare, some financial experts believe it has not been as successful as it could have been.

Yesterday (June 28), the financial institution shared its recent figures regarding Green Savings Bond which provide some insight into how successful the product has been.

Overall, the NS&I saving product acquired sales of around £288million as of March 31 of this year.

As recently as February 2022, NS&I launched a second issue of Green Savings Bonds as the interest rate rose from 0.65 percent to 1.30 percent.

Upon releasing its figures, the Government-backed financial body noted that the bonds were “priced cautiously” to determine the sensitivity of the market.

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Laura Suter, the head of personal finance at AJ Bell, believes Green Savings Bonds were a “flop”, due to the lack of return for savers.

Ms Suter explained: “Premium Bonds remain the jewel in NS&I’s crown, attracting more than £10billion of savers’ money in the past tax year.

“In total savers put £24.7billion into the accounts, in the hope of winning big in the monthly prize draw. However, the cost of living crunch and improving interest rates elsewhere meant that savers also withdrew more than £15.5billion from Premium Bonds in the same year.

“The Green Savings Bond has been a flop, with the paltry rate on offer at launch seriously hampering its appeal among investors.

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“At launch the three-year fixed-rate bond paid 0.65 percent, below the rate of an easy-access account at the time, and that has clearly deterred savers.

“There were rumours before the launch that Chancellor Rishi Sunak wanted to raise £15billon from the Green Savings Bonds, so the £288million raised is likely to lead to a review of what went wrong. As a comparison, in the same period retail investors pumped £15.7bn into ESG funds.

The finance expert noted that recent attempts to hike the interest rate have been unable to inject life into the saving product.

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She added: “The rate on the Green Bonds was doubled in February, to 1.3 percent, presumably in a last-minute attempt to boost uptake before the tax-year-end.

“Those that have handed their money over to help fund Government green projects might also be slightly dismayed to learn that the Government has two years in which to invest the funds, meaning that for two-thirds of the bond’s term the money could be sitting in an account doing no good.

“Withdrawals were the name of the game for NS&I in the past year, with eight of its 13 account types seeing net withdrawals.

“Cuts to interest rates, closures of some accounts and people raiding their savings in the cost of living crisis lead to these significant withdrawals.”

Despite this perceived failure, NS&I’s chief executive Ian Ackerley, explained why he believes it has been a “successful” period of time for the financial institution.

Mr Ackerley said: “This has been a successful year for NS&I, in which we have met all of our financial targets and restored customer service to our normal high standards.

“After a challenging period during the pandemic, I am proud of the work we have done to bounce back and deliver what our customers deserve – the ability to save in our unique products with fast, responsive and friendly customer service.

“I am also delighted that we have made good progress on transforming our business so that we can keep pace with changing customer needs and maintain our role as a cornerstone of the UK’s savings sector.”





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