Top 6 ethical savings accounts for 2020

Written by Rosie Murray-West on 7th Jan 2020

Updated January 7 2020

Finding a competitive savings rate is no easy task in the current climate, and can be made even more difficult when you throw sustainability into the mix.

Rates are lower than they were last year.

Fortunately, there are some ethical alternatives to high street banks that can still produce a decent return.

 

Coventry Building Society

  • The regular saver account: 2.5 per cent AER interest per year

In practice?

  • Save £1,000 into this account in one year and it will generate £25 in interest.

Key terms

  1. Save up to £500 a month
  2. If you make a withdrawal, you don’t get the interest for that month

Why is it ethical?

Building societies are mutual organisations, which means they are owned by their customers and not shareholders.

As a result, they behave differently – better. Shareholder owned companies tend to aim for maximum profits as quickly as possible, which can result in some dodgy decision-making, whereas building societies’ interests are the same as their customers’ interests, so good products and service are as important as profits (which go back to members anyway).

NB. Mutuality isn’t a sure fire guarantee of totally ethical behaviour, but it is a good foundation for it.

 

Gatehouse Bank

  • 5-Year fixed term deposit at 2.1 per cent expected profit – more on this below (minimum deposit £1,000)

  • 2-Year fixed term deposit at 1.9 per cent expected profit 

  • 1-Year fixed term deposit at 1.7 per cent expected profit

In practice?

– £1,000 after one year in the five-year account would give a profit of £21

– After one year in the two-year account, you’d have £19 profit

– After a year in the one-year account, you’d have made £17 profit

So what’s this expected profit thing all about then?

The accounts pay profit not interest because the payment and receipt of interest is forbidden in Islam as money cannot in itself generate money. Instead the company provides an ‘expected profit rate’. If the company feels that the expected profit rate will not be achieved, it will give reasonable advanced notice of the new expected profit rate and customers can close the account immediately with no penalty and will be given the profit they have earned.

The rates on its fixed bonds are competitive. Although they are not at the top of the best buy tables, they are in the top ten accounts.

Why is it ethical?

As an Islamic Bank, Gatehouse avoids investing in industries considered unethical under Shariah principles, which in practice are the same as those frowned upon under Christianity. The firm states it will “only invest funds in ethical goods and services and, for example, does not invest in gambling, alcohol, tobacco or arms”. It invests in real estate and construction as well as sukuk, which are sometimes known as Islamic Bonds.

 

Newcastle Building Society

  • Help to Buy ISA at 2.56 per cent (plus 25% government bonus)

In practice?

– £1,000 after one year in this account would generate £25.60 in interest plus £250 from the Government.

This Help to Buy ISA is one of the most competitive on the market.

  • Regular Savings Account at 2.25 per cent

In practice? 

– £1,000 after one year would generate £22.50 in interest.

There are a number of catches, though, with the regular savings rate only available for one year and then only on savings of up to £200 per month. Moreover, Southerners need not apply as this if for those in the North East only.

Why is it ethical?

Rated highly on a number of ethical and sustainable metrics, including investment, environmental and staffing policies.

 

Britannia

  • 1-year fixed rate bond paying 0.85 per cent

  • 2-year fixed rate bond paying 1.1 per cent

  • 3-year fixed rate bond paying 1.15 per cent

In practice?

– After one-year in the 1-year account, you’d get £8.50 interest on a £1,000 deposit

The Britannia fixed rate bonds allow you to earn a fixed rate of interest. They are suited to those with lump sums to put away, and you can open an account with £1,000 or more. You can’t access your cash during the term.

Why is it ethical?

Britannia is owned by the Co-operative Bank, and comes under its ethical policy. Although the company is now mainly hedge-fund owned, it claims to continue to invest using a strict ethical code.

Ecology Building Society 

  • Regular Saver at 1.75 per cent

  • Easy access at 0.85 per cent

In practice?

– The regular saver would pay interest of £17.50 after a year on a balance of £1,000

The regular saver pays 1.75 per cent a year and savers can put between £25 to £250 a month via direct debit, up to a maximum of £3,000 per calendar year. The easy access account also offers a competitive rate of 0.85 per cent, with an account limit of £75,000. Both accounts are also available to open on behalf of a child or in a child’s name.

Why is it ethical?

Ecology Building Society, known for its mortgages on eco-friendly new builds and renovation projects, also has a range of savings accounts that are rated best buys by Ethical Consumer.

It also has a Good Egg mark from Good With Money, awarded only to companies that make a positive impact in the world.

 

Triodos

  • Regular Saver at 1.75 per cent

  • Fixed Rate Cash ISA up to 1.1 per cent

  • Variable Rate 33 day notice Cash ISA up to 0.95 per cent

  • Junior Cash ISA at 2.25 per cent

In practice?

– £1,000 in the regular saver account after one year would generate interest of £17.50

– This amount in the fixed rate cash ISA would leave you £11 better off

– That’s £9.50 better off in the 33-day notice Cash ISA

– And an extra £22.50 interest for your child’s junior ISA after a year

The regular saver allows savers to stash up to £500 per month and allows up to two penalty-free withdrawals per year, with 33-days notice given.

The Junior ISA is quite far behind the best rates on the market (3.6 per cent with Coventry BS as at 7 Jan 2020), however it’s backed by solid ethical principles.

Why is it ethical?

Ethical Bank Triodos, which has a Good Egg mark from Good With Money, is a true leader in the field of ethical personal finance and only invests in businesses that have a positive social and/ or environmental impact.

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