Finding a competitive savings rate is no easy task in the current climate, and can be made even more difficult when you throw a wish to make your money more sustainable into the mix.
But the desire to save, in these difficult times, has never been greater.
Personal financial resilience has become a top priority for millions of us, having seen, painfully, what can happen without it in recent months.
It’s not easy to make money on cash savings at the moment, with the Bank of England keeping its base rate at a record low level in response to the ongoing coronavirus crisis.
Unfortunately the decision to save in cash almost always means losing money in real terms (once inflation has been taken into account).
However, unlike investments such as stocks and shares ISAs which can rise and fall in value, cash accounts come with reliable interest rates and deposit protection from the Financial Services Compensation Scheme. This means they remain an attractive option for those looking for a low risk place to store their money, for a while.
If there is nothing much to choose from by way of return (and we really are scraping the bottom of the barrel right now), you may as well choose a more ethical place to stash your cash than the high street banks, which remain beset by issues such as investment in fossil fuels, executive pay, fair treatment of customers, and so on.
Fortunately, there are some ethical alternatives to the big high street banks that can still offer a competitive, if a little uninspiring, return. On the ethical scale, they range from stand out social and environmental pioneers, to structurally less greedy than the big players, to neutral.
Here is our pick.
Regular Saver at 1.10 per cent
Easy access at 0.20 per cent
- Ecology Cash ISA 0.45 per cent
– The regular saver account would pay interest of £8.28 after a year on a monthly deposit of £100 for 12 months – so you’d have £1,208.28. The regular saver pays 1.10 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 0.20 per cent, with an account limit of £125,000. 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 is known for its mortgages on eco-friendly new builds and renovation projects. So what it takes in deposits from savers, is used to lend to making Britain’s housing stock more energy efficient.
Ecology has a Good Egg mark from Good With Money, awarded only to companies that make a positive impact in the world.
Regular Saver at 0.05 per cent
Variable Rate Cash ISA up to 0.2 per cent
Junior Cash ISA at 1.5 per cent
– £100 a month in the regular saver account for one year would generate interest of £0.60 (£1,200.60)
– The same deposits for one year in the Cash ISA would give interest of £2.4 (£1,202.40)
– And an extra £18 interest for your child’s junior ISA after a year (1,218)
The regular saver allows savers to stash from £25 per month with no upper limit, and allows up to two penalty-free withdrawals per year, with 33-days notice or 90-day notice options.
The Junior ISA is quite far behind the best rates on the market (2.95 per cent with Coventry BS), 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.
- 33-day notice savings account paying 0.35 per cent AER a year
- Save £1,200 over a year (£100 per month) and this account will generate £4.20 over the year in interest
- Minimum initial deposit of £10, maximum £500,000
- You must give 33 days notice before you can withdraw your money
Why is it ethical?
Charity Bank invests customers’ money into charities and social enterprises around the country – work which is always vital but absolutely critical now.
NB. The bank has three other savings products: a 93-day notice account, a one-year fixed rate and a three year fixed rate, paying 0.35 to 0.5 per cent, 0.6 per cent and 0.75 per cent respectively.
- The regular saver account: 1.3 per cent AER interest per year
- Junior ISA: 2.95 per cent
- Save £1200 into the regular saver account and it will generate £15.60 in interest over one year
- Save up to £500 a month
- 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. Chief executives of some of the larger building societies, including Coventry, have recently come under fire for high pay, at a time when savings rates are coming down.
5-Year fixed term deposit at 1.5 per cent expected profit – more on this below (minimum deposit £1,000)
3-Year fixed term deposit at 1.25 per cent expected profit
2-Year fixed term deposit at 1.1 per cent expected profit
– £1,200 after one year in the 5-Year account would give a profit of £18
– After a year in the 3-Year account, you’d have made £15 profit
– After one year in the 2-Year account, you’d have £13.20 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.
1-Year fixed rate bond paying 0.15 per cent
2-Year fixed rate bond paying 0.21 per cent
3-Year fixed rate bond paying 0.26 per cent
– After one year in the 1-Year account, you’d get £1.80 interest on £1,200 paid in.
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.
Other ethical savings options?
Credit unions are amazing local, again mutual organisations, which use savings from local people to provide affordable finance, also to local people. At times like this, they really come into their own, but few people know about them. Check whether there is a credit union local to you here.
The rates are often competitive and you know your money is helping people near you. Balances are protected by the Financial Services Compensation Scheme up to £85,000 in the usual way.
Commsave is an example of a large credit union open to people who work for certain companies or are members of the Unite Union, which pays dividends rather than an interest rate. (full list here).
Digital-only banking apps
Savings accounts offered by the new breed of digital-only banks, such as Monzo, Starling and Tandem, are not NOT ethical: compared to the big banks, they are a blank canvas, with no big legacy issues of poor customer service or investment in fossil fuels to put you off, and they are well-intentioned.
Investments NOT savings
For clarity, there are a number of options that seem more like savings than investments, but are investments. These include peer-to-peer platforms and round-up robo-investment apps. We’re big fans of investing, but it’s important you know the difference as with investing comes risk of loss.
Investing is more of a long term thing – at least more than five years, whereas savings accounts are more suited to shorter term needs.
If you want to know more about investing, take a look at our guides section.
The likes of Zopa and Ratesetter are also a notch above big banks, ethically-speaking, as they try to offer fair returns to investors and to borrowers. BUT (big but), these are investments rather than savings accounts, as they do come with risk of loss.
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