Interactive Investor

Going green with government bonds will put real returns in the red

22nd October 2021 08:31

Rebecca O'Connor from interactive investor

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interactive investor's head of pensions and savings sounds a warning on the government's Green NS&I bonds.

Becky O’Connor, Head of Pensions and Savings, interactive investor, said: “Green NS&I bonds may offer a feel-good factor for savers wanting to do their bit, but the interest rate mean they will be making a sacrifice on returns to do so.

“The rate of 0.65% is not competitive. They also offer a lower rate than you could expect from the Premium Bonds prize fund, so are unlikely to tarnish the appeal of the nation’s favourite savings product for those less committed to the idea of green savings.

“The government was always going to find it hard to price a product that would naturally appeal as a risk-free way to green your money. There was a need to make it a good enough deal for savers but also be fair to taxpayers and to ensure NS&I didn’t face a deluge of demand. Unfortunately, the rate chosen might not be good enough to tempt the masses, especially in a time of rising inflation. It may also cement the view that anyone who wants to commit their money to positive impact has to sacrifice returns, which does not have to be the case.

“The government says it will use an amount equivalent to what is raised through the green bonds to fund appropriate projects, such as zero-emission public transport, within two years. It says it will update people on how the proceeds are spent.

“This transparency will now be critical to savers who know they will be accepting a lower interest rate, for the peace of mind that they are funding the UK’s green dreams.”

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

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Related Categories

    Bonds and gilts

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