Originally Published July 2021, Updated February 2022
The government will release a new Green Savings Bond product later this year. Read on to find out what we know about the product so far and what exactly bonds are…
What are bonds?
Put simply, bonds are an IOU. They are a loan purchased from an investor (you) to a borrower (usually a government or business).
Bonds are mostly related to being offered by governments. However official agencies such as the World Bank and businesses also offer bonds (these are known as corporate bonds).
An investor such as yourself can buy bonds via investment platforms. Pension funds and fund managers can also purchase bonds.
Bonds have maturity dates – this is when the amount invested must be paid back in full to the investor.
Green Saving Bonds
This account will put the money that customers save into government led environmentally-focussed projects based within the UK. These projects include those that will help the government to achieve their target to reach net-zero carbon emissions by 2050. Examples of these projects include improvements to public transport, electric vehicle charging provision, building wind farms and home improvements such as insulation.
Whilst the money you save will be used to fund these projects, in the mean time you will receive a fixed rate of interest. This rate has been provided as 1.3% over a three year period.
Key points to note:
- The product will be a 3 year-fixed bond meaning your money will be locked away for 3 years (you will not be able to withdrawal your money during this time)
- As it is a government owned product, you will be sure to know that your money will be safe. Your money will be managed by the Treasury, rather than a bank
- You will be able to buy, sell and manage your bonds online via the NS&I website. This is similar to their well known and popular Premium Bonds product. Just like Premium Bonds, Green Saving Bonds will be made available through the government provider National Savings and Investments (NS&I)
- The bonds will be provided for those aged 16 and over
- You will be able to save an amount between £100 and £100,000
As someone who has a keen interest in the environment and sustainability, this product has certainly caught my eye. It is great to see the government move in the right direction of what is so important now and in the future. However, the rate of 1.3% is minimal, compared to other savings products currently available, the rate is disappointing.
One thing that I could see holding potential customers off is that your money will essentially be ‘locked’ away for 3 years. I do view all of my investments as money that I will lock away for several years, however I have the comfort that I can sell them if and when I choose to.