With the Government expected to cut the Cash ISA allowance in next week’s Budget, now may be a good time to review your savings options. A Cash ISA lets you earn tax-free interest on up to £20,000 per tax year – though that limit may soon fall – making it a useful way to protect returns from tax.
If you choose an ethical Cash ISA, your provider will not be lending your money to businesses or industries that harm the environment, and some go further by supporting organisations that deliver a positive impact.
While recent cuts in interest rates are good news for mortgage holders, they are less welcome for savers. Even so, there are still some competitive rates available, and cash savings offer steady returns that don’t rise or fall with the stock market. Just remember that if you won’t need your money for at least five years, investing may offer the potential for higher (though never guaranteed) returns.
Cash ISAs also benefit from deposit protection under the Financial Services Compensation Scheme.
Here, we round up the six top-paying ethical cash ISA providers.
1. Gatehouse Bank
- One Year Fixed Term Woodland Cash ISA, Shariah principles – 4.21 per cent (Gross/AER/Fixed)
An Islamic Bank, Gatehouse avoids investing in industries considered to be 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.
Additionally, for every Woodland Saver account opened or renewed, Gatehouse will plant a tree in a UK woodland on the saver’s behalf.
Under Shariah principles, interest cannot be earned but profit is generated instead. The profit shared is the expected profit rate at the time the account is opened. To date, Gatehouse has always generated and paid its customers the expected profit rate. Find out more about how it works here.
2. Nationwide Building Society
- 1 Year Fixed Rate Cash ISA – 4 per cent (Gross/AER/Fixed)
Nationwide is the UK’s largest mutual, meaning it’s owned by and run for the benefit of its members. Because of the way it’s run, it’s free to reinvest more profits into products and services that benefit members, rather than being driven by shareholders. It says doing the right thing by its members is at the heart of what it does.
3. Yorkshire Building Society
Single access eISA – 4 per cent (Gross/AER/Variable)
Yorkshire Building Society is an official signatory of the UN Principles for Responsible Banking – a single framework for a sustainable banking industry.
The mutual has made a commitment to identify and measure the environmental and social impacts of its business activities, set and implement targets where it has the most impact, and regularly report publicly on its progress.
4. Coventry Building Society
- 6 Access ISA 3.70 per cent (Gross/AER/Variable)
Coventry Building Society is the first building society to achieve B Corp status. B Corp is a globally recognised certification for companies that meet high standards of social and environmental performance, accountability, and transparency, and are run for the benefit of all people, communities, and the planet.
Building societies are mutual organisations, which means they are owned by their customers and not shareholders.
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).
5. Triodos Bank
- Fixed rate ISA for two years – 3.45 per cent (AER/Fixed)
Ethical Bank Triodos has a Good Egg mark from Good With Money, awarded only to companies that make a positive impact in the world.
Triodos uses the money its savers deposit with it to lend out to real economy businesses making a positive environmental, social or cultural impact on the world. Also offering stock market investments, crowd-funded Innovative Finance ISAs (IFISAs) and ethical current and savings accounts, Triodos is a true leader in the field of ethical personal finance.
6. Ecology Building Society
- Ecology Cash ISA – 3 per cent (AER/Variable)
Ecology Building Society uses its savers’ deposits to lend out as eco-friendly mortgages for new-builds and renovation projects with the ultimate aim of helping make Britain’s housing stock more energy efficient.
Ecology also has a Good Egg mark from Good With Money.
