Green bond rate increased to 3%

The interest paid on government-backed Green Savings Bonds was this week raised to 3 per cent, after the previous offering at 1.3 per cent failed to draw much support from investors.

Announcing the increase, National Savings & Investments, the public savings fund, said savers could “help fund vital green projects across the UK while earning an improved rate of interest”. The new bonds will pay 3 per cent gross, fixed for three years.

While commercial deposit-takers are offering up to about 3.5 per cent for three-year money, following recent steep increases in response to rising inflation and Bank of England base rate hikes, NS&I’s sharp increase greatly improves the green bond’s competitive position.

Richard Fuller, the economic secretary to the Treasury, said: “By increasing the returns on Green Saving Bonds to 3 per cent we are demonstrating our commitment to green infrastructure in the UK.”

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, the investment platform, urged investors to think carefully about locking away money for three years when one-year bonds were offering as much as 3.2 per cent.