Cash ISAs


Ethical buying guide to Cash ISAs, from Ethical Consumer

Ethical buying 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 37 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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Last updated: April 2018

 

 

What is a cash ISA?
 


 Cash ISAs are more popular than stocks and shares ISAs because there’s no risk to your money. Cash ISAs are the same as any standard savings account except they are tax free for a limited annual amount of saving. For the tax year 2017-18 you can put up to £20,000 into a cash ISA, a stocks and shares ISA, an innovative finance ISA, or a combination of the three, if you’re a UK resident aged 16 or over.

The specialist ethical providers Triodos and Charity Bank both offered competitive cash ISA rates in March 2018. For example, Charity Bank was offering a 33-day notice ethical ISA paying 1.7% annually at the time of writing. Triodos was offering 1.05%.

 

Image: cash in ethical shopping guide

 

For comparison, Nationwide, a big mainstream building society, was only paying 0.75% but withdrawals could be made without notice.

 

 

Innovative Finance ISAs

 

An innovative finance ISA – sometimes called an IFISA – is an ISA that contains peer-to-peer loans instead of cash in a bank or stocks and shares in companies. They were introduced in 2016 to make it easier to invest tax free with a wider range of providers.

Peer-to-peer lending matches up investors, who are willing to lend, with borrowers, who could be individuals, businesses, or property developers.

 

Triodos and Abundance both offer IFISAs. Triodos is currently offering three IFISAs in renewable energy projects and a charity, with interest rates of 5-7% and terms of between 5 and 17 years. Abundance invests in green energy projects at a rate of 6-8% over 3-5 years.

See our article on Crowdfunding for more details.

 

 

Stocks and shares ISAs

 

These investment type ISAs can be linked to ethical funds, see our dedicated guide.

 


 

 

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

 

Nationwide Building Society is the largest building society in the world, with more assets than all the other British building societies combined. 

Nationwide was marked as having a positive investment policy because it confirmed that “Nationwide has no direct investment in coal, oil, gas, tobacco, arms, alcohol or gambling. Since that statement, we have also withdrawn from new commercial lending, so our business lending is reducing.”[1]

Nationwide got our best rating for likely use of tax avoidance, and middle rating for environmental reporting. 

 
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References

1.  Email to Ethical Consumer from Ms Slade Nationwide’s Media Manager, February 2018

 


 

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


 

 


 

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