NS&I has today boosted the rate on its Green Savings Bonds to 3 per cent, after launching them less than a year ago with a rate of just 0.65 per cent.
The bonds help finance green projects and the Treasury-backed bank had a target of £15billion to flow into them.
However, earlier in the year it was revealed in the first six months only £275million of deposits had been made, with savers seemingly put off by such a low rate.
Rate boost: The Green Savings Bonds now pay 3% – up from 1.3% previously
NS&I launched a new issue in February with a higher rate of 1.3 per cent, but rates have been rising across the board since, especially fixed bonds.
That comes of the back of the Bank of England base rate rising from 0.1 per cent in December to 1.75 per cent now.
The green bonds can be opened online with £100, but cash is locked away for three years. This timeframe is a fairly niche one, with the majority of savers opting for one or two year fixes.
Currently, savers can get 3.2 per cent over 12 months with Atom Bank and 3.47 per cent for a two year deal with Smartsave – a higher rate than the best buy three year fix in our independent This is Money savings tables, indicating that is where the competition is.
The 3 per cent green bonds don’t make it into our tables, with 17 providers currently offering 3.15 per cent or more over three years.
However, it is likely that some savers will be willing to forfeit some rate to fund green projects – especially now the bonds pays 3 per cent rather than just 1.3 per cent.
Meanwhile, some experts have warned against fixing for too long, with rates rising and more base rate hikes forecast in the coming months.
Richard Fuller, 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.
‘This will drive investment in projects to tackle climate change, improve sustainability and increase renewable energy capacity.’
The projects include making transport greener, using renewable energy over fossil fuels, preventing pollution, using energy more efficiently, protecting natural resources and adapting to a changing climate.
More information can be found the NS&I website.
