NEWSFLASH FOR YOUR CASH: there’s little to no cost to being good in every sense, ie. for your pocket and the world. Srsly.
Why aren’t we all doing it then? Because the deals that are good for other people and the planet AS WELL AS a good deal for you are kind of hidden away, in a little-known corner labelled “ethical”, far away from the top of the comparison tables, but not actually that far off the money.
Here are seven ways to get a genuinely good deal without paying a whopping premium for the privilege of having principles.
- On savings
Rates from ethical banks, while not absolutely top of the comparison tables, will not be too far off. For example, the absolute best rate on a cash ISA according to Moneyfacts.co.uk is a 2.51 per cent deal from Virgin Money – but you need to leave your money in for five years to keep the rate, and the long term is one of the reasons for the higher than average rate. Meanwhile, cash ISAs from Move Your Money’s top-rated ethical banks: Triodos, Charity Bank and Co-operative, pay 1.3 per cent, 1 per cent and 0.5 per cent respectively – they also allow easy access, meaning you can make withdrawals without losing the interest rate.
In comparison, a typical (non-ethical) bank cash ISA pays 1.44 per cent, according to the latest data from Moneyfacts. Admittedly, we are dealing here with varying degrees of not very much of a return – that’s just savings rates these days. However, it also means there is even less of a reason not to put your money somewhere good, because a saver putting £1,000 into the ethical Triodos ISA would have a balance worth £1,013.08 after a year, compared with £1,014.50 in an average-rate cash ISA. So the cost of being good with money in every way on a £1,000 balance over a year on the best buy ethical cash ISA is only £1.42.
- On current accounts
With current accounts, rate is usually not the most important criteria, but service, overdraft interest rates if you use an overdraft and in-credit rates if you do have a decent balance. You’d be forgiven for thinking they are all much of a muchness – and truth be told, they are. Except there are a couple worth singling out for being more deserving of your cash than the rest if you are bothered about people and planet too.
Good (in every sense) current accounts are thin on the ground. The only ethical bank that offers current accounts is Co-op, but another bank ranked better than the Big Five for ethics, according to Move Your Money, is Metro Bank. The Co-operative Bank Standard and Current Account Plus accounts are rated five-stars by Moneyfacts. They have award-winning service, but the drawback is the lack of an overdraft facility with these accounts – the Plus account only offers a maximum overdraft of £200. Interest on in-credit balances is 0 per cent – not unusual with standard current accounts. The bank gives you £100 as a welcome and £25 to charity.
Unlike the Co-op, Metro Bank offers an overdraft facility that is subject to eligibility, which comes with a 15 per cent rate. Move your Money says that Metro Bank: “scored full marks for customer service. Metro Bank also did well in ethics, and scored highly for running an honest and tax-haven free operation that received few fines or complaints. Excessive bonuses, inflated remuneration for directors and no real power for customers have all dented Metro Bank’s score for culture.”
- On investments
Thankfully, the investment industry is cottoning on to the benefits of applying a bit of moral judgment to decision-making. Sustainable and responsible investing (SRI) is a £13 billion plus industry. According to the Investment Association, ethical funds enjoyed net retail sales of £460 million in 2014, their highest figure since 2007.
The decline of the FTSE index over the past year is likely to focus minds.
It’s still not that easy for normal folks to compare returns, though. And some funds called ethical don’t even look that ethical when you peer beneath the bonnet, deriving gains from activities that treat the environment like a dustbin, even if they refuse to invest in tobacco stocks (because we know, we know, ethics can be unhelpfully subjective).
But there are plenty that hit the mark = the top 15 ethical unit trusts and OEICs (Open-ended investment companies) in the year to June 2015, according to Lipper Investment Management, are listed in the table below.
Non-ethical funds returned 6.55 per cent (the FTSE fared worse, returning less than 1 per cent over the same period). Meanwhile, the AVERAGE return from an ethical fund was 7.89 per cent, according to these figures, a good money benefit of 1.34 percentage points in the 12 months to June.
|Alliance Trust SF UK Ethical A Acc||17.93|
|Alliance Trust SF UK Growth SC1||15.75|
|F&C Responsible Global Equity 1 Acc||15.58|
|Premier Ethical A Inc||15.50|
|First State Asia Pacific Sustainability A GBP Acc||15.45|
|Kames Ethical Equity B Acc||14.87|
|Standard Life Inv UK Ethical Ret Acc||13.81|
|Henderson Global Care UK Income A Inc||13.56|
|FP WHEB Sustainability A Acc||12.94|
|Legal & General Ethical R Inc||12.41|
|F&C Responsible UK Income 1 Inc||12.26|
|Henderson Global Care Growth A Inc||12.17|
|CIS Sustainable World Trust A Inc||12.01|
|Kames Ethical Cautious Managed Acc B||11.91|
|F&C Responsible UK Equity Growth 1 Inc||11.55|
You don’t have to pick a unit trust or investment company to invest responsibly. Thanks to crowdfunding and peer to peer, you can invest directly in things like renewable energy through Abundance, Ethex or Trillion Fund, or social enterprise through the likes of Buzzbnk.org (although many of these projects will offer a reward rather than an investment with interest).
There can sometimes be tax breaks on socially responsible investing, such as the Social Investment Tax Relief, which are particularly beneficial for higher rate taxpayers. The Innovative Finance ISA will mean some of these investments will be tax-free from next April.
- On energy
Green energy tariffs are often cheaper than the average standard energy tariff from the Big Six, giving the lie to the claim that renewable energy is expensive. So if you are a standard tariff customer with British Gas, nPower, E.on, SSE, EDF or Scottish Power, you could save hundreds of pounds a year by BEING GOOD.
Good Energy, the 100 per cent renewables supplier, offers a market-leading tariff of between £1,100 and £1,200 for its dual fuel customers. The major firms – British Gas, SSE, Scottish Power, E.On, EDF and nPower – charge £1,236 on average. The Co-op, which supplies 68 per cent renewable energy (compared with an average of 17 per cent across all suppliers) and offers a dual fuel tariff at £944 – a full £292 cheaper than the average Big Six tariff. A good money saving of £292.
- On personal borrowing
You can borrow personal loans from Smile, the internet brand belonging to the Co-operative Bank, for a representative APR of 5.4 per cent. You can borrow from other people via Zopa.com or Ratesetter, without having to go through a bank at all. Zopa typically charges 4.8 per cent for a five year loan. The best buy personal loan rates currently available are 3.6 per cent, so choosing a good option here is more expensive. However, not everyone would be eligible for the very best rates anyway. If you apply and the best rate the provider will offer you is 4.8 per cent, then it is worth bearing in mind that you could get the same rate from Zopa with none of the guilt issues that come with the bank.
- On insurance
According to the EIRIS website, Co-operative Insurance and Royal & Sun Alliance, the insurer behind the More Than and Phoenix Life brands, tick the most ethical boxes. Co-operative Insurance offers car insurance from £167 a year and home insurance from £118. More Than car insurance starts at £161 and home insurance at £99. These deals are competitive with some of the best on the market.
- On business money
For business borrowing you might chose to venture into the growing peer to peer sector with one of the more ethical platforms such as zopa.com, mentioned above, which has a business loans section.
There’s little choice, too, when it comes to business current accounts. Many banks offer a period of fee-free banking but these are often not the most ethical option. Even opting for one of the smaller players, such as Yorkshire Bank, once you unpick the bank’s ultimate owner (in this case National Australia Bank) you may find yourself stuck with a business account that doesn’t really match your business’ mission or values.
Triodos Bank offers a range of services for more established ethical businesses, from fee-paying current accounts to loans.
The Co-operative Bank’s Business Directplus account offers 18 months of fee-free business banking in addition to a range of other elements, making it the Good-with-money business current account of choice.
And there you have it. Getting a good deal on your finances does not have to mean a bad deal for the rest of us, and if there is a premium, it is usually quite small compared to average deals on the market. Remember: #nocompromises.
The information given on good-with-money.com is general information that is intended as general guidance and is not professional advice. You should always seek independent financial or legal advice before making a decision on what to do with your money.