With the cost-of-living crisis continuing to squeeze household budgets, many Brits will be focused simply on making ends meet. But if you do have something to spare once essential outgoings are taken care of, it’s a very good idea to build up a cash savings pot.
Although savings rates are better now on average than they have been in many years, unfortunately once inflation is taken into account, saving in cash almost always means losing money in real terms.
However, unlike investments such as Stocks and Shares ISAs which can go up and down 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 up a rainy day fund.
If you’re looking for a more ethical place to stash your cash than the Big 5 high street banks, which remain beset by issues such as investment in fossil fuels, executive pay, fair treatment of customers, and so on, check out these alternatives.
On the ethical scale, they range from stand out social and environmental pioneers (such as Triodos Bank, Ecology Building Society and Charity Bank), to structurally less greedy than the big players, to neutral.
Here are our top nine:
1. Co-operative Bank
- Regular Saver paying 7 per cent interest gross/AER (variable) per year.
- 1 Year Fixed Term Deposit paying paying 4.28 per cent gross /AER fixed (annually).
Why is it ethical?
The Co-op Bank has a long history of ethical banking, having launched its first ethical policy back in 1992. Now, it is committed to carbon neutral operations, and won’t fund or invest in companies that manufacture or market destructive products like weapons and tobacco. It says it won’t support businesses or organisations that have business relationships with oppressive regimes and will promote human rights and equality across the world.
However, in 2017 the bank was bailed out by international hedge funds. For many, the sale put a question mark over the bank’s ethical credentials.
Key terms
The Regular Saver is for Co-operative Bank current account holders only. You can save up to £250 a month in a sole or joint account. Minimum deposit is £1. The Fixed Term account has a minimum deposit of £1,000 and you cannot withdraw funds within the term.
2. Nationwide
- Flex Regular Saver paying 6.5 per cent interest gross/AER (variable) per year.
- 1 Year Triple Access Online Saver paying 4.10 per cent gross/AER (variable) per year.
Why is it ethical?
As a building society, Nationwide must hold at least 75 per cent of its assets in residential property, making it far less likely than its big bank competitors to be lending to unsustainable firms. Its profits are also invested back into the business for the benefit of borrowers and savers (it’s “members”) rather than shareholders.
Key terms
- With the Flex Regular Saver, after four withdrawals the interest rate reduces to 2.15 per cent AER/gross a year (variable) for the rest of the term. You must hold a current account with Nationwide to open this savings account.
- With the Triple Access Online Saver, you can make three withdrawals without losing interest.
3. Coventry Building Society
- The Regular Saver account: 4.75 per cent interest (variable) gross/AER per year
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 come under fire for high pay, at a time when savings rates remain low.
Key terms
With the Regular Saver account you can save from £1 to £500 per month. You can access your money, but it’s with a charge equal to 30 calendar days interest on the amount withdrawn.
4. Tandem Bank
- The Instant Saver account: 4.4 per cent interest (variable) gross/AER per year
Why is it ethical?
A digital challenger bank, Tandem aims to be a “greener, more accessible bank for people across the UK”. Tandem guarantees that your savings are never used to fund fossil fuel extraction and production or similar destructive industries. Instead, money held in Tandem savings accounts is used solely to fund its lending products.
Its home improvement loans finance energy-efficient improvements such as solar panels and air source heat pumps, saving people money on energy bills while also helping to save the planet. Tandem’s EPC mortgages reward customers who own energy-efficient homes.
Key terms
- No minimum deposit. Manage your account online. The rate includes a 0.25 per cent “top-up” but this is available at the click of a button.
5. Ecology Building Society
- 35-Day Notice at 4.10 per cent per year gross/AER variable
- Regular Saver at 4.25 per cent per year gross/AER variable
- Easy Access at 3.60 per cent per year gross/AER variable
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.
The company boasts a Good Egg mark from Good With Money, which is awarded only to companies that make a positive impact in the world.
Key terms
- The 35-Day Notice account offering 4.10 per cent a year has a minimum balance of £500.
- The Regular Saver pays 4.25 per cent a year and savers can put in between £25 to £250 a month via standing order or direct debit, up to a maximum of £3,000 per calendar year.
- The Easy Access account offers 3.60 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.
- The 180-day notice account, launched in April 2024, pays 5 per cent a year with a minimum deposit of £1,000.
6. Triodos Bank
- Online Saver Plus 3.25 per cent gross/ AER
- Ethical Savings Bonds at up to 4 per cent gross /AER (over two years)
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.
Key terms
- The Online Saver Plus offering 3.45 per cent gives instant access with no notice required. Three penalty-free withdrawals.
- The Ethical Savings Bonds offers fixed rates of one or two years.
7. Charity Bank
- Ethical 33-day notice savings account paying 2.97 per cent /3 per cent Gross/AER*
- Ethical one-year fixed rate account paying 4.26 per cent AER a year
Why is it ethical?
Charity Bank was founded to support charities with loans that they couldn’t find elsewhere and to show people how their savings could be invested ethically and in ways that would make them happy. It invests its customers’ money into charities and social enterprises around the country.
It says on its website: “Charities have never been more needed, but also more challenged. That’s why our promise – of supporting charitable activities and helping people to save and do good – is more important than ever.”
Key terms
- The 33-day notice account has a minimum initial deposit of £10, maximum £500,000. You must give 33 days notice before you can withdraw your money. The one-year account has a higher minimum deposit of £5,000.
Top 6 ethical current accounts
8. Gatehouse Bank
- 5-Year Woodland Saver fixed term deposit at 4.10 per cent expected profit – more on this below (minimum deposit £1,000)
- 3-Year Woodland Saver fixed term deposit at 4.35 per cent expected profit
- 1-Year Woodland Saver fixed term deposit at 4.50 per cent expected profit
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.
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.
Key terms
The minimum deposit on all Gatehouse Bank’s fixed-rate saver accounts is £1,000.
9. Raisin UK
Raisin UK is slightly different as it’s a ‘savings platform,’ which works with a selected number of banks and building societies and help source savings accounts for you.
Top ethical offers:
- One year fixed term deposit account with Al Rayan – the world’s oldest Sharia-compliant bank – offering 4.80 per cent/AER/Gross
Why is it ethical?
Raisin UK enables you to compare savings rates from ‘ethical’ banks. It offers savings deals with building societies, which are by nature more ethical than banks, Sharia-compliant accounts (such as Gatehouse and QIB UK) as well as Tandem, which says it is aiming to be a ‘Good Green Bank’.
Sharia-compliant banks adhere to Islamic principles, many of which can also be considered ethical values. These principles include:
- Not charging interest on money borrowed from the bank
- Not paying interest on savings accounts (see more below)
- Not benefitting from restricted practices such as gambling, pornography, firearms, alcohol, and tobacco
- Not making high-risk investments
- Sharing profit and risk mutually between the bank and consumers
As with Gatehouse Bank, these accounts pay an ‘Expected Profit Rate’ (EPR) instead of an annual equivalent rate of interest on your savings. You’ll see the EPR advertised as a percentage, making it easier to compare to the interest rates offered by traditional banks. The EPR is your share of the money that the bank makes investing your deposit. Because the profit that the bank makes can vary, so too can the EPR. However, Raisin UK says the EPR has “never not been paid out.”
Other ethical savings options?
Credit unions
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 and Starling, 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 generally 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.
