Called to account
Saving for a rainy day with a mini cash ISA need not compromise your ethics. Jenny Rhodes reports.
What is an ISA?
Individual Savings Accounts (ISAs) are a special type of tax-free savings account that can be made up of several components: cash; stocks and shares (eg unit trusts, shares, bonds) ; and life insurance (although from April 2005, this part was combined with the stocks and shares component). To slightly complicate matters, ISAs are available in either Mini or Maxi versions. You can own two Mini ISAs in each tax year, but one must be a Cash ISA and the other a Stocks and Shares ISA. You may only have one Maxi ISA in each tax year and it must contain a stocks and shares element. You can't take out a Mini ISA and a Maxi ISA in the same tax year.
Mini Cash ISAs
It's always a good idea to have a small nest egg set aside, whether it be a for a holiday, a deposit on a house or in case of emergencies. Mini Cash ISAs are the most popular type of ISA. They are ideal for short term savings and where you do not want to take any risk with your money. Mini Cash ISAs are the same as any normal savings account except they have a special tax status granted by the government. This means that ISAs are currently free of both income tax and capital gains tax. You can invest £3,000 per year into a Mini Cash ISA until 5 April 2010.(1) This limit applies to the whole tax year, rather than your account balance. So, for example, if you invest £3,000 and then take £500 out in the same year, you can't put another £500 back into your account, despite there only being £2,500 in it.
Most banks and building societies offer Mini Cash ISAs and this guide covers the main banks and building societies along with those offering specific environmental or ethical benefits.
Ethical Specialities
Both the Ecology Building Society and Triodos Bank have strong ethical values at the heart of their organisations. The Ecology Building Society funds mortgages solely for the promotion of sustainable housing and communities through energy efficient housing, ecological renovation, derelict and dilapidated properties, small-scale and ecological enterprise and low-impact lifestyles.(2) Netherlands-based Triodos Bank (owned by SAAT (Stichting Administratiekantoor Aandelen Triodos Bank or 'Foundation for the Administration of Triodos Bank Shares') specialises in providing finance for businesses with social or environmental mandates both in the UK and abroad.(3)
The rule for rating smaller ethical companies for environmental reporting is that when annual turnover exceeds £3million, the rules requiring fixed targets and third party verification of environmental reports now apply. These rules now apply to both Triodos Bank and Ecology Building Society.
Ethical Consumer considers Co-operative Financial Services (which comprises the Co-operative Bank, CIS and Smile) to have the strongest ethical policies of all the high street banks with respect to where savers' money is then invested or loaned.
Voluntary standards falling?
Other banks and building societies do not have such strong ethics at their core. A full overview of banks' and building societies' ethical policies can be found in the 'Banks (internet banking)' and 'Banks (current accounts)' reports on ethiscore. Global voluntary initiatives such as the Equator Principles and UNEP FI (the United National Financial Initiative) have worked to increase accountability in the financial sector. However, despite these agreements, banks have been criticised for failing to meet environmental standards. Barclays' involvement in the Narmada Dam and the Trans-Thai-Malaysia Project (see company profiles) are just one example.
More recently, the International Rivers Network stated that HSBC was one of six large international banks which had arranged a $1billion bond issue for China Exim Bank. The IRN report alleged that China Exim Bank, the world's largest export credit agency, had financed several environmentally and socially destructive projects in countries with abysmal human rights records. These included the Merowe Dam in Sudan, the Yeywa Dam in Burma, Nam Mang 3 Dam in Laos and the Lower Kafue Gorge Dam in Zambia. According to the report China Exim Bank had not adopted any international environmental or human rights standards and its environmental policy was confidential. Friends of the Earth US stated that, "It is disingenuous for the banks to claim to be meeting environmental standards when what they're really doing is environmental money laundering through China Exim Bank to finance projects that would never meet the banks' own environmental standards." (4) Organisations such as the Corporate Responsibility Coalition and Banktrack have been working to increase financial sector accountability to wider society.
Links
References
1 Inland Revenue Rev Budget Note 02: Retention of ISA Limits
2
Email from the Ecology Building Society to ECRA 20/12/05
3 Triodos
Bank NV Annual Report 2004
4 International River Network: NGOs warn
of "environmental money laundering" 21/07/05
5 Labour Research: Vol
94 No 12 Dec 2005
6 www.bigcampaign.org/boycottlistwot2.html
23/02/05
7 www.corporatewatch.org.uk:
News Boycott Barclay's - Here's Why 8/12/04
8 CORE Coalition: A Big
Deal? Corporate Social responsibility and the Finance Sector in Europe 1/12/05
9 www.guardian.co.uk:
Bank criticised over loan to man who gave money away 11/08/05