Savers get chance to back government’s green projects – but experts say returns are ‘paltry’
Green bonds offering savers the chance to back the government’s environmental projects are going on sale – but experts think the “paltry” returns on offer will see demand wilt.
The bonds, described as the first ever green savings product issued by a country, go on sale online via the Treasury-backed National Savings & Investments (NS&I) today.
Projects such as zero-emission buses, offshore wind and innovative low-carbon technologies will be backed by the funds raised, the government said.
The chancellor said savers could put their money to work in the fight against climate change
Chancellor Rishi Sunak said the bonds, launching ahead of the COP26 climate conference, give savers the chance “to put their money to work in the fight against climate change”.
But they pay an annual rate of just 0.65% over a three-year term even though experts said savers could earn a similar return on an easy access account without having to lock their money away.
The Treasury has this month already issued £16bn of green sovereign bonds – which are parcels of government debt – to institutional investors, but the new product is the first of its kind to be available to ordinary savers.
They are being offered for a minimum investment of £100 and a maximum limit of £100,000 per person. The full amount will be held for three years and cannot be withdrawn during that time.
Plans to issue the green savings bonds were first revealed in the chancellor’s March budget.
But experts said the 0.65% rate on offer was a disappointment, with significantly better deals available elsewhere.
A Bank of England rates hike could make the bonds look even less attractive
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said: “With a rate of just 0.65%, early enthusiasm for the bonds is likely to wither.
“It’s such a disappointment for savers who were hoping for a competitive rate that meant they could do the right thing for the planet and their pocket at the same time.
“Instead NS&I are relying on savers who are willing to pay a price for going green with their savings.”
She said rates of up to 1.8% over three years were available elsewhere while a 0.65% rate could be had on an easy access account.
Laura Suter, head of personal finance at AJ Bell, said: “All that hype for such a paltry rate, is definitely what some savers will be thinking
“Why would savers lock their money away for three years for the same interest rate they can currently get in an easy-access savings account?
“This equation makes even less sense now the nation is looking down the barrel of an interest rate rise from the Bank of England, which will lead to a hike in savings rates.”
The Treasury said research showed appetite among most 25-44 year olds for the concept of such a savings product and that 42% of 18-34 year-olds would be prepared to accept a lower rate of return if they knew their money was being put towards green projects.
It said the government would report regularly so that investors could see which projects have been funded and the positive environmental impact that their investment was making.
Business
Donald Trump tells UK to ‘get rid of windmills’ and says raising windfall tax on North Sea oil is ‘big mistake’
Donald Trump has said the UK is making “a very big mistake” in its fossil fuel policy – and should “get rid of windmills”.
In a post on Friday on his social media platform, Truth Social, Mr Trump shared news from November of a US oil producer pulling out of the North Sea, a major oil-producing region off the Scottish coast.
“The UK is making a very big mistake. Open up the North Sea. Get rid of windmills!”, the US president-elect wrote.
The Texan oil producer Apache said at the time it was withdrawing from the North Sea by 2029 in part due to the increase in windfall tax on fossil fuel producers.
North Sea oil rig. Pic: Reuters
The head of Apache’s parent company APA Corporation said in early November it had concluded the investment required to comply with UK regulations, “coupled with the onerous financial impact of the energy profits levy [windfall tax] makes production of hydrocarbons beyond the year 2029 uneconomic”.
Chief executive John Christmann added that “substantial investment” will be necessary to comply with regulatory requirements.
Mr Trump used a three-word campaign pledge “drill, baby, drill” during his successful election campaign, claiming he will increase oil and gas production during his second administration.
In the October budget announcement, UK Chancellor Rachel Reeves raised the windfall tax levied on profits of energy producers to 38%.
Called the energy price levy, it is a rise from the 25% introduced by Rishi Sunak in 2022 as energy prices soared following Russia’s invasion of Ukraine.
Many oil and gas businesses reported record profits in the wake of the price hike.
The tax was intended to support households struggling with high gas and electricity bills amid a broader cost of living crisis.
Apache is just one of a glut of firms that made decisions to alter their North Sea extraction due to the Labour policy.
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Even before the new government was elected, three companies, Jersey Oil and Gas, Serica Energy and Neo Energy – announced they were delaying, by a year, the planned start of production at the Buchan oilfield 120 miles to the north-east of Aberdeen.
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