Martin Lewis offers advice on reinvesting in NS&I bonds
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For those with at least £100 to invest in savings, NS&I Green Savings Bonds will enable people to go green this winter knowing their money will be used to help fund projects that encourage using the planet’s resources wisely. However, the savings provider is remaining tight-lipped on what the savings rate is likely to be, which could be a deal-breaker for some.
It’s still not clear what the savings rate will be and whether this will be exciting enough to tempt new investors.
But what is clear is that the new green bonds will be used to fund environmentally-friendly projects – and there’s a strong demand for this type of savings account.
Those interested will be able to invest between £100 and £100,000 for a minimum period of three years.
As these bonds are for a fixed-term, interested investors will need to have an emergency fund saved elsewhere because the money can’t be accessed before the period ends.
And although people want to support green initiatives, experts are hoping that the savings rate isn’t a deal-breaker.
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.”
However, he added: “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.
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“Savers won’t be investing directly in renewable energy projects, rather they’ll be lending money to the Government to do so, in return for interest on their money.”
Despite this concern, NS&I boss Ian Ackerley hinted at a more competitive rate for all its products when it commented on the company’s cuts to interest rates back in September 2020.
“It is important that we strike a balance between the interests of savers, taxpayers and the broader financial services sector; and it is time for NS&I to return to a more normal competitive position for our products,” he said.
The Green Savings Bonds will be available to buy from the NS&I website by the end of 2021.
Every pound that is invested into these green bonds will be passed onto HM Treasury to spend on projects that support the environment and encourage the use of renewable energy.
Projects will include building offshore wind farms, improving public transport and funding the UK’s move towards electric vehicles.
As part of the Government’s plans to meet net-zero carbon emission targets by 2050, some of the funding will be spent on zero emission buses to help reduce harmful emissions caused by petrol and diesel vehicles and other transport.
There will also be a focus on projects that help the UK move away from a reliance on fossil fuels in favour of renewable energy, such as wind and solar power.
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Other green initiatives where savers’ money will be spent include preventing pollution, using energy in a more efficient way, protecting natural resources and adapting to climate change.
On its website NS&I said: “HM Treasury then plans to allocate an amount equivalent to the proceeds raised from Green Savings Bonds, to its chosen green projects, within two years.”
It added: “The Government will publish details about how the money is being spent and what the environmental benefits are, so you can see the difference you’re making.”
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