Savings giant NS&I has chopped the rate being offered on its Green Savings Bonds, with the new issue offering returns of 3.95% – down from 5.70% previously.

Issue six of the bonds was released on Tuesday, with a new rate of 3.95% AER (annual equivalent rate), fixed over a three-year term.

Launched in 2021, Green Savings Bonds enable savers to help fund green government projects across the UK.

The bonds help to raise funds for projects as part of the UK Government Green Financing Framework.

The minimum investment in Green Savings Bonds is £100, with a maximum limit of £100,000 per person for each issue. Investors need to be aged 16 or over to purchase the bonds. The full amount deposited will be held for three years and cannot be withdrawn during this time.

The rate on NS&I three-year green bonds has been subjected to a savage pruning, from flourishing almost at the top of the market, to wilting away well below the most competitive rates

Issue five of the bonds, which was available until Monday this week, offered savers a rate of 5.70% AER.

Sarah Coles, head of personal finance, Hargreaves Lansdown, said: “The rate on NS&I three-year green bonds has been subjected to a savage pruning, from flourishing almost at the top of the market, to wilting away well below the most competitive rates. You can make far more on your savings elsewhere, so you’d need an over-riding passion for funding Government green projects to prioritise this account.

“This move hasn’t been driven by NS&I’s fundraising targets, because the green bond sits outside that. The amount of money it aims to raise is agreed between the Treasury and NS&I, and based on how much it wants to raise through the bonds – and how much through gilts. Clearly it has decided it was paying more than it needed to in order to raise this money at 5.7%.

“For anyone keen to find a better deal, despite the fact the market has dropped from the peak, you can still find some strong rates. Deals close to 6% are the kinds of rate that savers could only dream of for well over a decade. However, there’s every chance they’re set to fall further, so if you’re planning to fix, don’t hang around.”