Savers have stashed £275million into NS&I’s green savings bonds since the product was launched six months ago.
A total of £173 million has been deposited into the bonds since NS&I launched a new issue in February, doubling the rate of return on offer from a measly 0.65 per cent to 1.3 per cent.
In the four months prior to that, only £102.2million had found its way into the three-year fixed rate green savings product, data shows.
The green agenda: Money held in NS&I’s green bonds will go towards green projects such as offshore wind and zero-emissions buses.
James Blower, founder of The Savings Guru, believes the NS&I Green bonds have so far been a colossal failure.
‘To have only raised £275m of a £15bn target in six months is a huge failure for the much vaunted green savings bonds,’ said Blower.
‘We don’t know whether it is Treasury or NS&I driving the pricing but they’ve got it completely wrong, despite doubling the rate.
‘There’s definitely an appetite from savers to support green savings products but not at the sacrifice of half the best available rate in the market.’
Money held in NS&I’s green bonds is being used to help achieve the government’s green agenda, funding projects such as offshore wind and zero-emissions buses.
The minimum investment in Green Savings Bonds is £100, with a maximum limit of £100,000 per person for each Issue.
NS&I suggests that its decision to keep the rate low, is in part, to avoid stifling competition across the wider market.
An NS&I spokesperson said: ‘The Green Savings Bonds have performed well in the context of the green savings market, and NS&I has a responsibility to balance the interests of the customer, the taxpayer, while also not disrupting the market.
‘The existing green savings market is small and also a new market for NS&I, and it is therefore important that we do not disrupt it whilst also encouraging new entrants to the market.
‘Since launching Green Savings Bonds in October 2021, we have had the opportunity to better understand customer behaviour and how to balance customers’ attraction of the interest rate versus the attraction to savers of how their investment supports key environmental initiatives.’
However, it is clear that at 1.3 per cent the deal remains far from popular and this is likely to become even more evident as savings rates continue to rise across the wider market.
Green savings products aside, savers can almost double the rate by opting for the best three-year deals on the market.
Al Rayan Bank is paying 2.57 per cent on its three year deal, whilst United Trust Bank and Oxbury Bank currently both pay 2.5 per cent.
Even those fixing for one year could do much better. There are currently 10 one year fixed rate deals paying 2 per cent or more.
Although savings deposited into these deals are not fully protected by the Treasury, like with NS&Is savings deals, they are all protected up to £85,000 per individual by the Financial Services Compensation Scheme. In the case of joint accounts, this doubles to to £170,000.
Blower believes that NS&I will be soon forced to increase rates in order to meet their funding targets.
‘If the Treasury and NS&I want to hit their £15billion target, they are going to need to increase the rate again if they want to attract significant numbers of savers on board.
‘I think they will have to think again on the rate and I’d be surprised if we didn’t see an increase in June or July.
‘I think the reason they haven’t so far is because they’ve got it so badly wrong – they started way too low, obviously expecting more interest because of the green element, which has left them in a difficult position to keep increasing it.’