Cash ISAs


Shopping guide to Cash ISAs, from Ethical Consumer

Shopping guide to Cash ISAs, from Ethical Consumer


This is a product guide from Ethical Consumer, the UK's leading alternative consumer organisation. Since 1989 we've been researching and recording the social and environmental records of companies, and making the results available to you in a simple format.

What are ISAs? What ethical options are available?

 

This guide includes:

  • Ethical and environmental ratings for 44 ISA's
  • Best Buy recommendations
  • What ISA's are
  • The problem with banks
  • Moving accounts
  • New providers
  • Ethical ISA's

 

 

This product guide is part of the special report: Ethical Money

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Our ratings are live updated scores from our primary research database. They are based on primary and secondary research across 23 categories - 17 negative categories and 6 positive ones (Company Ethos and Product Sustainability). Find out more about our ethical ratings

 

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Last updated: July 2016

 

 

What is a cash ISA?
 


An ISA (Individual Savings Account) is a type of savings account that is the same as any normal savings account except that the interest earned is tax free for a limited annual amount of saving. For the tax year 2016-17 you can save up to £15,240 in a cash ISA if you’re a UK resident aged 16 or over.


Cash ISAs are the most popular type of ISA because there’s no risk to your money (unlike a stocks and shares ISA where the value can fluctuate depending on the state of the financial markets and where it is invested). Savings advice generally is that you should use all of this allowance before saving elsewhere. However you may be able to get a better interest rate in a conventional savings account through loyalty schemes with your existing current account provider.

The market for ISAs, as with most banking products, is dominated by the big 5 banks, Barclays, Sanatander, Lloyds, RBS and HSBC. This isn't good news for ethics and the environment but there are a range of alternatives available.

 


 


Divesting your ISA from the fossil fuel industry

 

Mainstream banks may well take your ISA savings and lend them on to a range of companies involved in controversial activities. This could include: investments in armaments companies, nuclear weapons, animal testing, tobacco, pornography and, of course, the fossil fuel industry. You can read more about the big five banks and their controversial investments in our guide to current accounts.

 


 

 

Corporate policies
 

Most banks do now have Corporate Social Responsibility (CSR) policies which give the impression that they are as concerned about some of these activities as you are.

However looking at their actual investments, as we have done for the ranking table (above), shows that in many cases these words are little more than hot air.

As you'll see from the table very few banks, other than the three ethical ones at the top, get our best rating for environmental reporting and only four institutions get a product sustainability mark for having an ethical lending policy.

You can read about the most ethical options in the Best Buy box above, all of which make positive investments that benefit society and the environment.

 


 

 

Mutuals
 

Mutuals (also known as building societies) are also a good option for ISAs. Mutual deposit takers account for about 34% of cash ISA balances. They are seen as a more ethical option due to the fact they lend mainly in the housing market and don't invest in fossil fuels and other unethical sectors.

All the mutuals featured on the table above pick up an additional mark in our scoring system for company ethos due to their democratic structures. They also have branches on most high streets which makes them easy to find and use. You can read more about mutuals and building societies in our guide to savings accounts.

 


 

 

Ease of moving accounts
 

Government efforts to promote competition in the sector mean that it’s pretty easy to move your whole Cash ISA to a more ethical provider should you choose. In theory it should take no more than 15 days, but you should follow advice on how to do it without losing its tax free status. Contacting the new provider is usually the best place to start.

 

 

 

Company behind the brand

 

Al Rayan Bank is a Living Wage employer. According to its 2016 report ‘Ethical Banking for Everyone’:

“It was better protected from the recent global banking crisis than conventional banks because its method of banking, where investment must be in tangible assets and not financial instruments based on speculation, did not create the ‘toxic’ assets that were recognised as a root cause of the crisis”.

 

It was also stated in this report that:

“The source of an Islamic bank’s funding, profits and business investments must be ethical. They cannot be from businesses that are considered unlawful under Sharia, i.e. companies that deal in interest, alcohol, gambling, pornography, speculation, tobacco, arms and other commodities contrary to Islamic values.”[1]

 A May 2016 ‘Global Market Snapshot’ was downloaded from the website of Al Rayan Bank’s parent company, Masraf Al Rayan, showing investments it may be involved in, including oil commodities and companies.[2] According to its 2014 Annual Report, Masraf Al Rayan, was almost 12% owned by the Qatar Holding Company. This was the same company as Qatar Holding LLC, which owns Harrods, and has significant shareholdings in Sainsbury’s, Heathrow Airport Holdings, and Tiffany & Co.

 

 Want to know more?

If you want to find out detailed information about a company and more about its ethical rating, then click on a brand name in the Score table. 

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References

1. www.alrayanbank.co.uk/media/288419/ethical-banking-for-everyone.pdf 

2. www.alrayan.com/en/Global-Market-Snapshot 


 

This product guide is part of the special report into ethical money. See what else is in the report.


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