NS&I green savings bond 'will need special features' and 'favourable tax treatment'


Ahead of the 2021 Spring Budget, HM Treasury announced the UK will launch the world’s first sovereign green savings bond for retail investors. The Chancellor of the Exchequer Rishi Sunak said it would allow savers to help drive the country’s transition to net zero by 2050.

The green savings bond will be offered through NS&I, the Treasury-backed savings provider, which offers Premium Bonds among a range of other savings products.

The Chancellor Rishi Sunak said earlier this year: “The UK is a global leader on tackling climate change, with a clear target to reach net zero by 2050 and a Ten Point Plan to create green jobs as we transition to a greener future.

“In a world first, we’re launching a new green savings bond which will give people across the UK the opportunity to contribute to the collective effort to tackle climate change.

“And we’re also launching new competitions that will unlock innovation in renewable energy and help us develop the cutting-edge technology we need to reach net zero.”

In February, HM Treasury said further details would be set out in the “coming months”, and that the product would then go on sale in 2021.

NS&I has since set up a green saving section on its website, which states: “We’re offering a green savings product on behalf of government. Coming later in 2021.”

While details about the savings scheme remain under wraps, Express.co.uk has asked Kay Ingram, the Director of Public Policy at national financial planning group LEBC for her thoughts on the upcoming product.

“Until we know the full details of the new NS&I Green Bond I cannot say whether it is something we will be recommending to our clients,” she said.

“There is clearly a lot of interest in this area of investment amongst investors and given the need to tackle climate change and the legislative weight behind that, it is likely that investments in green technology will generally do well.

“That said, this is a growing area of investment opportunities so competition will be fierce.

“Whether investing this way through a fixed interest vehicle or via an equity stake by buying shares in a green fund is the right thing to do will depend upon individual circumstances and the risk appetite of the investor.

“One immediate challenge for fixed interest investors, who are investing for the longer term, is the rising rate of inflation, which tends to erode the real value of fixed rate investments over time.

“The Bank of England have recently signalled that they expect inflation to reach 2.5 percent by the end of this year, up from 0.7 percent in March.”

Ms Ingram also highlighted another vital point which retail investors will need to be aware of.

“It will also be important that savers recognise that investing in new technology and innovation is a riskier proposition than holding cash savings and so any positioning of this offer will need to reflect the true risk to investors in both the product literature and the return offered,” she said.

“Clearly the Government will be aware that trust in NS&I was badly damaged when they slashed the interest rates offered to savers from being the best in the market to being amongst the worst, so any offering will need some special features and favourable tax treatment to make it fly off the shelves, given the wide choice of alternative green investment opportunities available.

“We await the details with interest.”

Earlier this year, Ricky Knox, Tandem Bank CEO, commented on the new green bonds product.

Sharing his thoughts on the question of buying these bonds when they’re released, he said: “It all depends on what kind of rate the bond might offer – so it’s in the Government’s interests to make them attractive.

“Rishi and his team will know there are already a host of other green bonds out there offering competitive rates,” he added, before highlighting the five-year fixed term Gatehouse green savings bond.

“But with savings rates so low at the moment, and funding so cheap, the Government won’t have too hard a sell for those of us wanting a guaranteed return while locking in our savings.”



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