Savers who want to make a difference with their cash no longer have to sacrifice a decent return after National Savings and Investments raised the rate on its green bond to 5.7%.
The UK government-backed provider is offering the deal over a three-year term and savers will not be able to access their money in that period.
Money invested in the green savings bond helps finance projects chosen by the government, which include offshore windfarms and flood defences, and tree-planting and sustainable farming schemes.
So far more than £915m has been put into the accounts, which were announced in the spring budget of 2021.
The rate is a marked improvement on the previous 4.2% and, according to industry experts, means sacrificing only a small amount when compared with market-leading accounts.
Laura Suter, the head of personal finance at the advice firm AJ Bell, said the three-year bond “is just shy of the market-leading rate for a three-year account, which stands at 6.05%. On £10,000 of savings that means savers are sacrificing about £35 of interest a year to go green.”
However, Suter added that the rate put it just ahead of Gatehouse Bank’s three-year Woodland Saver, which paid 5.5% and planted a tree for every account opened.
The fixed-rate savings market has been competitive in recent months as challenger banks have fought older providers for business.
The rising Bank of England base rate has allowed them to offer ever better returns, and the best-buy tables have changed frequently as new accounts have been offered.
NS&I is offering a 30-day cooling-off period to savers who want to switch accounts but after that they must wait the full three years to withdraw money.
For anyone who recently opened the NS&I bond at the lower rate, Suter suggested they check if they were still within the cooling-off period.
She said the pace of change in the market made it hard for savers to know if they had locked in at the right time.
“While we’re not expecting huge increases in the base rate this year, it is expected to climb further from here, so savers need to think about whether fixed rates will improve after they have locked in,” she said.
“Three years is also a long time to lock away money with no chance of early exit, so savers need to be certain they won’t want to access the money in that time.”
Dax Harkins, the NS&I chief executive, said the rate rise provided “a great opportunity for savers who want to see a guaranteed return on their investment while also making a difference with their savings by helping to make the world greener, cleaner and more sustainable”.
Mark Hicks, the head of savings at Hargreaves Lansdown, said that while not market-leading, “it may well be enough for those savers looking to get a good deal for their money while contributing to green projects”.
To open an account you must pay in £100 to £100,000 and be aged 16 or older. Accounts can be opened at nsandi.com.
