Green bonds get thumbs down from experts due to paltry interest rate

UK green bonds went on sale to the public today in the first issue by National Savings and were immediately hit by a volley of brickbats about the ‘paltry’ interest they are paying.


Designed to provide cash for the government’s transition of the UK economy to a greener, more sustainable base, the response by experts was why bother when you get more interest from a bog-standard savings account.


Interest on the bonds, which have to be held for three years, is a fixed annual 0.65%, which is around a third of the rates available on fixed saving products offered by such as Zopa and Atom Bank.


Earlier in the day, Huw Pill the Bank of England‘s new chief economist also warned UK inflation might reach 5% over the next few months implying a real (inflation-adjusted) yield on the new bonds of minus 4.35%.


Sarah Coles, senior personal finance analyst, Hargreaves Lansdown said any early enthusiasm for the bonds is likely to wither.


“It’s such a disappointment for savers who were hoping for a competitive rate that meant they could do the right thing for the planet and their pocket at the same time.


“Instead NS&I is relying on savers who are willing to pay a price for going green with their savings.


“If you came across an account offering 0.65% over three years in any other context, you wouldn’t give it a second glance.


“You can currently get 1.81% from Al Rayan over three years, and even 1.45% from the same bank over one year. You can get 0.65% on an easy access account (with limited withdrawals) from Coventry Building Society.”


The bonds have been issued to coincide with the COP26 climate summit in Glasgow, which starts on 31 October and have a minimum investment of GBP100 and a maximum of GBP100,000.


They will be on sale for three months and are guaranteed by the UK government.

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