Investing in the future

But is the NS&I Green Savings Bond the answer, asks Paul Lewis

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The Government has announced the details of a new Green Savings Bond from National Savings & Investments.  The Bond will pay a very underwhelming 0.65% a year for three years. The interest is added each year to the amount invested. The capital and interest are paid back
when the bond matures, so the interest is taxable in that final year.

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You can invest from £100 to £100,000 but you cannot cash the bond in early, so you will not have access to the capital or interest it earns for three years.  The bonds are promoted on the NS&I website as “Help make the world greener, cleaner, and more sustainable”. But all the money invested in the NS&I Green Savings Bond will go into the regular Treasury coffers.

The Treasury says that it “plans to allocate an amount equivalent to the proceeds”  to its chosen green projects, ie to existing projects including making transport cleaner, preventing pollution and promoting energy efficiency. It will not create any new green investments or initiatives by the Government.

The low interest rate of 0.65% is easily bettered. Anna Bowes of the Savings Champion website told me there are more than 50 three-year bonds on the market that pay a higher rate of interest. Many of them pay the interest annually or even monthly.  The best rate at the time of writing is from the bank UBL with a minimum £2,000 deposit, which pays 1.82%. Someone investing £10,000 in the NS&I Bond would earn £196 over the three-year term but £546 with the UBL bond.

You can get nearly as high a rate and an element of greenness with a three-year Woodland Saver from Gatehouse Bank, where a tree is planted for every new account.  Rates and offers change rapidly, so do your research to find the deal that suits you.

For more information, visit www.savingschampion.co.uk and www.nsandi.com.

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Paul Lewis presents Money Box on Radio 4.  QUESTIONS? Send any questions to Paul.Lewis@radiotimes.com  Paul cannot answer you personally, but will reflect them in his column.