Ethical Savings Accounts and Ethical Banking Choices in the UK

Oct 31, 2011
Kathleen Duffy

Which Ethical Bank for my Money? - Proteome, Wikimedia Commons

The banking crisis has caused people to question where their savings are being invested. There are many ethical savings schemes available to UK savers.

Customer trust in the banking industry has been gravely shaken by the present financial crisis and may never recover. Additionally, some customers may be concerned that banks often invest their money in the arms trade, tobacco companies, pornography or political regimes that ignore basic human rights. Many are wondering if there is a more ethical alternative to the high street banks.

Ethical Alternatives to Traditional High Street Banks

Happily there are alternatives – and such banks are steadily growing. As far back as 2008 when we first became aware that financial meltdown was on the cards, according to Simon Birch in The Guardian (1), the UK ethical banking sector was experiencing a steady increase in consumer confidence and investment.

But aren’t ethical interest rates on savings lower than their high street bank equivalents? Yes, but according to a Which? Money (2) survey carried out in February and March 2010, customers prefer to accept a lower rate knowing that their savings and investments are supporting sound ethical and environmental policies.

Ethical Investment Research Service MORI Poll

The growing demand for ethical finance is further confirmed by an Ipsos MORI survey run in October 2011 on behalf of the Ethical Investment Research Service (Eiris) (3). Eiris is a leading global provider of independent research into the way in which companies perform in relation to environmental, social, governance and ethical concerns. This poll found that of 1,030 adults questioned, 38% of the British public who were already with a financial service provider, were interested in green or ethical financial products and services. Of these, 90% said they would switch to a different provider if it offered green or ethical investment choices.

Ethical Savings in the UK – Three Suggestions

Here are three ethical savings alternatives available to UK customers as recommended by an article, ’10 ways to greener spending’ featured in The Guardian, 15th October 2011.

Triodos

Triodos is a Bristol-based ethical bank that has a policy of only lending to and investing in organisations that benefit people and the environment. For instance, some of their projects include organic farms, renewable energy projects, community arts ideas, housing trusts and medical charities.

They have a variety of savings options including:

a cash Isa offering 2.01% AER (2.00% tax-free). Rate includes 0.25% 12 month bonus.
Online Saver Plus can be opened with as little as £1, offering an interest rate of 2.00% gross variable, including a fixed 1% 12 month introductory bonus.
Ethical Savings Bonds give 2, 3 and 5 year bonds, with fixed rates paying 2.75%, 3.25% and 3.75% respectively.
Right Start Saver for children where the interest rate is 0.80% gross/AER variable and can be opened with as little as £1.

In their 2008 article, The Guardian does ask that potential savers bear in mind that Triodos is the subsidiary of a Dutch-based banking group. This means, says Simon Birch, that if it were to go under, “ …savers would have to apply to the Dutch deposit guarantee scheme. However, this recently raised its maximum payout threshold to €100,000 (£77,700) - significantly more than the £50,000 offered to UK savers”.

Triodos does not offer personal savers a current account or mortgages. However, it does provide banking services to businesses and charities. More details can be found on their website.

Charity Bank

Describing itself as “a different bank for people who want a different world”, Charity Bank is the only UK regulated Bank that is also a charity. It lends only to charities, voluntary organisations and social enterprises that benefit communities in the United Kingdom. Since 1992 Charity Bank has funded over 900 organisations. Charity Bank is not a full-service bank like the big players you find on the high street, but provides borrowing and saving facilities as well as a cash ISA. It offers:

basic Savings Account – a simple account which can be opened by anyone. Withdrawals from the account are subject to 33 days notice. The more money deposited, and the longer it is left in the account, the more interest you earn. You can deposit money at any time or, alternatively, set up a direct debit for regular monthly savings.
cash ISA requiring a minimum deposit of £250 and paying 2.5%. Withdrawals are subject to 33 days notice.
Small Steps account for children which requires an initial deposit of £10 or more. Interest of 2% is added quarterly.

Ecology Building Society

The Ecology Building Society says it is ‘building a greener society’ by only financing mortgages for properties that have a positive environmental benefit. Established in 1981, saving with them helps support sustainable developments such as house renovation, urban self-build, organic smallholdings and low impact living . Their accounts include:

cash Isa with instant access paying 2%. The minimum investment is £25.
savings accounts, including instant access and 60 day notice accounts.
mortgage provision if they believe your project will benefit the environment.

These facilities are operated by first class Freepost from their Yorkshire Head Office and on line. Check out their website for helpful leaflets.

Find Out More About Ethical Investment

For further ethical choices which match your particular preferences, the Ethical Investment Research Service (Eiris) has a searchable on-line directory where you can find advisers specialising in ethical investment.

Please bear in mind that interest rates can go up or down and the figures above were correct at the time of writing. Check on the companies’ websites for up-to-date information.