Eco-conscious savers will be disappointed to see NS&I has slashed the interest rate on its Green Bonds.

The product has gone back on sale with the rate reducing from the previous 3.95 percent down to 2.95 percent.

The rate is fixed for three years with the money going towards Government spending on environmental projects.

Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “These were always likely to face the business end of a pair of shears as the savings market gradually heads south.

“However, the decision to cut so soon and so hard is disappointing. It raises the question whether we will see Green Savings grow, or whether the harsh prune has done too much damage.”

She warned people may be put off investing in the product even with its green credentials, when they can get better rates elsewhere.

Ms Coles said: “The Government has decided it has raised as much as it needs to at this rate. It was always committed to raising funds through a combination of this savings product and Green Gilts, and the gilts have always brought in the vast majority of the cash.

“There’s a real risk that such harsh cuts will severely damage enthusiasm for the product. When you can still get 4.6 percent on a three-year bond elsewhere, you’d need to be a passionate believer in the government’s green projects to settle for as little as 2.95 percent right now.

“And we know from the original launch in October 2021 that there’s a limited appetite for the bonds when they fall so far short of the best around.”

NS&I previously announced the prize fund rate for Premium Bonds would be cut, reducing from 4.65 percent to 4.4 percent from the March draw.

The odds of bagging a prize in the draw will remain the same at 21,000 to one for each £1 Bond.

A frustated Premium Bonds customer recently contacted the savings group as they had not won any prizes on Bonds they had held for over 50 years.

NS&I said in response: “Every £1 Bond has an equal chance of winning a prize, regardless of when or where it was bought.

“In fact, over 95 percent of eligible Bonds have been bought since the year 2000, which is why newer Bonds seem to win more frequently.”

For the latest personal finance news, follow us on Twitter at @ExpressMoney_.