In his Budget speech, given on 3rd March 2021, Chancellor, Rishi Sunak, announced that in the summer, NS&I will be launching a green retail savings bond, “which will give people across the UK the opportunity to contribute to the collective effort to tackle climate change.”
The money raised from these new bonds will fund a range of projects that are focused on reducing the UK’s reliance on fossil fuels – to ‘help the UK build back greener’
Of course, the devil will be in the detail and we’ll have to wait and see what this green savings bond will actually have to offer. But, based on the recent activity at NS&I, I think it might be too soon to get our hopes raised. We need to wait before we celebrate and expect this new bond to be as exciting as the 65+ Guaranteed Growth and Income Bonds that were available in January 2015, for those of you that remember.
When the 65+ Guaranteed Income and Growth ‘pensioner bonds’ were launched in January 2015, the rates were market leading – and on the three bond in particular, this was by quite some margin. At that time, the 65+ Bonds helped NS&I raise over £13bn from 1m savers – more than double the new Net Financing Target (the amount of money the Treasury is looking to raise from savers). That said, the Treasury has confirmed that any money raised by this bond will not count towards the Net Financing Target for 2021-22. So why is this important?
Well, as mentioned above, the Net Financing Target is the amount NS&I is asked to raise for the Government, and the new target for the tax year 21/22 has been revealed as £6bn, down from the massive £35bn that NS&I was asked to raise in the current tax year.
However, as a tsunami of funds were deposited with NS&I in the earlier part of last year, as savings rates fell elsewhere, NS&I had soon breached even this massive figure, which led to devastating rate cuts in September and in turn a mass exodus of savers from NS&I accounts.
Last year, NS&I went from Hero to Zero after cutting the rates on its products from the most competitive to virtually nothing and then to add insult to injury, its administration capabilities spectacularly failed, and savers experienced huge problems in contacting NS&I to get their money back.
With these cuts still firmly at the front of our minds, it would suggest that NS&I will not be keen to be offering market leading rates this time around. They will probably bank on the fact that as this is a green bond, many people will be interested anyway – and even though its reputation has been tarnished, we know that savers still trust that NS&I will keep their money safe.
So, although we don’t know just how much the Government is looking to raise through this initiative, it could we be that either the bonds will be gone in a flash – and/or they will be offering mediocre rates at best.
Of course, whether we’ll be able to actually open and fund the bonds is yet to be seen – NS&I is still apologising for its admin issues, stating on its website “We’re sorry if you’ve had trouble getting in touch recently. We’re working hard to get everything back on track”
Let’s hope things are sorted by the summer.
We will of course keep you up to date with any developments, so watch this space.
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