To mark Good Money Week, a campaign designed to raise awareness of sustainable, responsible and ethical finance, we’ve taken a look at the different types of ethical savings accounts available and how their rates compare to high street banks.
Easy access savings accounts are popular during times of economic uncertainty as, although they often offer lower rates than other types of savings accounts, they have the advantage of allowing savers to quickly access their money. The top paying easy access savings accounts currently come from high street banks, with the top rate of 0.80% AER being offered by Leeds Building Society and Yorkshire Building Society.
Gatehouse Bank, however, offers the joint-second best easy access rate paying an expected profit rate of 0.75% on its Easy Access Account. As this is a sharia’a compliant savings account which means that deposits can only be used for ethical investments. For more information about Sharia’a complaint banks read our guide on sharia’a compliant savings accounts.
Another competitive easy access savings rate comes from Al Rayan Bank, which is also sharia’a complaint and pays an expected profit rate of 0.70% AER on its Everyday Saver (Issue 2).
Meanwhile, further down the chart, Triodos Bank pays 0.30% AER on its Online Saver Plus, as well as a lower rate of 0.05% AER on its Online Saver, and Ecology Building Society pays 0.20% AER on its Easy Access. Both these providers operate under ethical principles.
Likely the most well known ethical provider in the easy access chart is The Co-operative Bank, which has a customer-led ethical policy, and pays 0.09% AER on its Smart Saver.
“Islamic banks pay an expected profit rate, they don’t pay interest, but thankfully for savers they can compare these to other savings accounts,” explained Rachel Springall, finance expert at Moneyfacts.co.uk. “Islamic banks are also perfectly safe to invest with when they are covered by the Financial Services Compensation Scheme and regulated by the Financial Conduct Authority, so savers have the same level of protection as with any other provider under the same scheme. There has been a rise in the number of challenger banks over the years too, and as long as they have the same protection, it is just a case of savers building trust with a brand.
“Ethical brands also state whether they give back to the community and, in light of the current UK recession, savers may want to invest with a brand that is supporting others. Triodos Bank financed various projects in 2019, such as in the sustainable energy sector, and its number of customers has grown. While the Coronavirus pandemic may prove a challenge for any business, the principles with an ethical brand remain.”
Many providers offer savings accounts that give a percentage of balances to charity and some of these offer highly competitive rates in the charts. For example, The Melton Building Society pays the second best rate in the up to 90 days notice chart with its Branch Rainbows 90 Day Notice and Online Rainbows 90 Day Notice accounts paying 1.00% AER. The branch version gives 0.10% of the average daily balances held in Branch Rainbows 90 Day Notice accounts to Rainbows Hospice for Children and Young People charity, and the online version gives 0.10% of the average daily balances held in Online Rainbows 90 Day Notice accounts to Rainbows Hospice for Children and Young People charity.
Also in the up to 90 day notice chart, Mansfield Building Society pays 0.60% AER on its 90 Day Community Saver (1st Issue). This account, which is only available to existing members with a minimum of 1 years continuous membership or locals in the Nottingham, Derbyshire or South Yorkshire areas, donates an equivalent of 0.10% of the average total balances invested in all Community Saver accounts to its Charitable Trust each year. Mansfield Building Society also offers the same donation with its 30 Day Community Saver (1st Issue), which pays 0.30% AER.
The top rate in the up to 30 days notice chart is 0.75%, but Tipton & Coseley Building Society pays a competitive rate of 0.50% AER in this chart on its 30 Day Community Notice Saver. With this account, Tipton & Coseley Building Society pays the equivalent of 0.10% of the average 30 Day Community Notice and Community Regular Saver account balances on the 31st December each year to the Tipton and Coseley Charitable Foundation. This building society also pays 0.50% on its 30 Day Notice Midlands Air Ambulance Saver, which pays an annual donation to the Midlands Air Ambulance Charity.
In the same chart, Ipswich Building Society pays 0.30% AER on its Mutual Advantage account, which is only available to existing members or those within specific post codes. A percentage of the average account balance within this account is donated to charity each year.
Savers looking for an alternative to savings accounts, could consider an ethical investment instead. As usual with investments, ethical investments carry greater risks compared to savings accounts, but can offer higher returns. For more information about this type of investing visit our ethical investing page.
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