What continued low interest rates mean for being good with your basic savings

Written by Rebecca O'Connor on 14th Aug 2015

The money markets are not “pricing in” (expecting) a Bank of England base rate rise until August 2016 at the earliest now, according to this article.

While that is pretty rubbish news if you want a better return on your savings, it is great news if you have a big mortgage on a variable rate and are a bit stretched financially, because it means your repayments are likely to stay the same for longer.

And actually, one of the reasons that there is little or no premium for making ethical decisions with your savings is the low interest rate environment – in other words, when everyone’s returns are pretty mediocre, there is little to differentiate between a non-ethical and an ethical product.

So you may as well choose the ethical one! (You knew that was coming, right?)

But really, you can get an ethical(-ish) instant access cash ISA from Nationwide Building Society, which scores 64/100 on Move Your Money, and pays 1.4 per cent. This is only 0.11 percentage points less than the very best instant access ISA on the market from Virgin Money, which offers 1.51 per cent (although you can only make three withdrawals per year).

Richard Branson, owner of Virgin Money, wants money “to do some good in the world”

Although Virgin Money’s ethical credentials are not yet established, the company says it is committed to helping your money “do some good in the world”. It has recently launched the Virgin Money Foundation, currently helping social enterprises in the North East before being rolled out across the country. Virgin says: “We want to use our expertise to do some good in the world – through helping charities, communities and the environment.”

blackgreen butterflySo the best buy ISA from Virgin Money could indeed be the BEST buy instant access cash ISA in every way – helping you to make the world a bit better, and also improving your savings balance. 

When it comes to regular or fixed savings account (that are not ISAs and therefore not tax-free – so it’s wise to use up your full ISA allowance first) the options are not as competitive. For example, a best buy one-year savings bond from Aldermore pays 2 per cent, according to Moneysupermarket.com’s tables (interestingly, although Aldermore is not an “ethical” bank as such, it does specialise in lending for sustainable property developments, according to this article). A typical rate from one of the main ethical providers – Triodos, Charity Bank and Ecology, is 1 per cent, although Ecology will pay up to 1.5 per cent if you deposit between £10,000 and £20,000. Even Virgin Money, mentioned above as being good-ish on the ethical front in the context of that best buy instant access cash ISA, pays just 1.01 per cent.

So on traditional, non-ISA savings accounts, there is still unfortunately a bit of a compromise. But when rates are so low, it’s a compromise between £10 or £20 (naf all or pretty much naf all) on £1,000 after a year. Unfortunately, neither is worth writing home about, so you may choose that it is worth taking the ethical account on that basis alone.

See our 7 ways to be good with money blog for more ideas on how to do the right thing, #nocompromises.

The information given on good-with-money.com is general information that is intended as general guidance and ideas and is not professional advice. You should seek independent financial or legal advice if necessary before making a decision on what to do with your money and we cannot take any responsibility for any losses. 

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