Ethical Savings Accounts

In mid-2020, with little competition in interest rates, and with the top UK banks having poured approximately £150 billion into financing fossil fuels since the Paris Climate Agreement was adopted in 2015, perhaps this is the easiest, as well as the most important time to make your savings account align with your values.

We give our top recommendations for the most ethical savings accounts, explore other options including building societies and credit unions, and remind ourselves what’s so bad about most high-street banks.

Types of savings account

There are several types of savings accounts to choose from. The practical details should also be checked, as they vary on how much you need to deposit to open one, and how restricted withdrawals are, as well as interest rates. And with branches continually closing, you probably want to be able to open it and bank online, and check how you would pay cheques in, if you need to do that.

• Easy Access is good if you may need to withdraw money, but probably will have lower interest

• Regular Savings is good if you can make a monthly deposit for a year, and should have higher interest

• Notice is good if you are able to wait to withdraw money, and should have higher interest

• Fixed is good if you want to avoid a falling interest rate, but it won’t rise either

• Sharia (or Islamic) banking offers an ‘expected return’ rather than an interest rate, but it works out similarly for you.

• ISAs offer tax-free interest payments, but since the Personal Savings Allowance was launched in 2016, unless you are a higher rate taxpayer or have very large savings, your interest payments will be tax-free anyway

• Providers may also offer savings accounts for children, businesses or other organisations.

High Street bank savings accounts 

To put it simply, the way the big banks manage money causes harm, and has major impacts throughout the world.

They contribute to the underfunding of public services through tax avoidance, to extreme inequality through excessive executive pay, and to accelerating climate change and global insecurity through the lending choices they make.

Many of the banks in this guide also appear in our guide to current bank accounts. Below is a quick rundown of the worst scorers in four key areas.

Tax avoidance

Secrecy and tax avoidance continues to occur in the banking sector, undermining the funding of public services that society depends on. We rank companies on their likely use of tax avoidance strategies, by looking at the type of subsidiary companies they have in tax havens. Our worst rating is given to:

• Al Rayan
• Banco de Sabadell
• Barclays
• Citigroup
• HSBC (includes First Direct, and part owns M&S Money)
• Lloyds Banking Group (includes Bank of Scotland
• Halifax
• Scottish Widows
• Birmingham Midshires
• Oaknorth
• RBS (NatWest)
• Sainsbury’s
• Santander (includes Cater Allen)
• Shawbrook
• Tesco

Excessive executive pay

We mark companies down for paying their senior staff more than £1 million in a year, as we believe this to be excessive in a world of huge inequalities.

Citigroup was the worst, with its highest paid director getting a shocking $25 million in 2019, but many other high- street and supermarket banks appear on the list.

Funding climate change

Six companies featuring in this guide are listed in the latest ‘Banking on Climate Change’ report (more information in our feature on banks and the environmental crisis) looking at who funds extreme fossil fuels, like tar sands, Arctic oil and coal mining:

• Barclays
• Citibank
• Deutsche Bank (part owns ICICI Bank)
• HSBC (including First Direct, and part owns M&S Money)
• NatWest Group (Coutts, Ulster Bank, RBS)
• Santander (including Cater Allen)

Funding nuclear weapons producers

Eleven banking groups in this guide were connected to the financing of the nuclear weapons industry, according to the latest ‘Don’t Bank on the Bomb’ report. More on this in our feature on banks and their investments in nuclear weapons. Again, Citigroup was named as one of the worst banks for this, having invested more than $17 billion in 2019.

Also named, in order of $millions invested, were: 

• Lloyds Banking Group (includes Bank of Scotland, Birmingham Midshires, Halifax, and Scottish Widows)
• HSBC (includes HSBC, First Direct, part-owns M&S Money)
• Santander (includes Cater Allen)
• ICICI Bank
• Banco de Sabadell (TSB Bank)
• Bank of Ireland (Post Office)

Banks with policies excluding nuclear weapons investments, but with loopholes that meant they did actually invest, included:

• Barclays
• Royal Bank of Scotland (RBS, now NatWest Group which includes Coutts and Ulster Bank)
• Danske Bank

 Although The Co-operative Bank was listed as having a policy that excluded all nuclear weapons investments, it is currently 12% owned by Invesco, an investment company also linked to nuclear weapons producers.

The worst of the worst

We have highlighted two anti-social finance issues – tax avoidance and directors’ pay – and the funding of both fossil fuels and nuclear weapons. Read our feature on high pay in the financial sector.

Four names cropped up in all four of these areas – Barclays, Citibank, HSBC and Santander.

Banks with ethical savings accounts

Triodos publishes details of every organisation it lends to. You can explore on its website which projects it is financing near you, in the UK, and in the world, including social housing, sustainable energy, arts and culture, and fair trade. It also produces an in-depth blog on how money can have a positive impact, including its vision to reset the economy, with a resilient and inclusive recovery from the global corona crisis. It offers Easy Access, Regular Savings, Fixed Rate bonds, Cash ISAs, Children’s savings accounts, and Business and Charity savings accounts.

Triodos and Charity Bank are among 62 banking members of the Global Alliance for Banking on Values (GABV), a network of banking leaders from around the world committed to advancing positive change in the banking sector. Both focus their lending on progressive businesses and organisations, and publicly disclose all these investments – a great practice for a sector that is resistant to openness and accountability. Charity Bank offers 33-day or 93-day notice, and Business, Charity, Club and Credit Union savings accounts. 

The Co-operative Bank continues to have a sector-leading ethical policy, with a lot of detail on who it will not lend money to. It does not score so well overall in our rankings because of the activities of some of the investment groups which now own it. Customers have the option to join the independent Customer Union for Ethical Banking, which works to hold the Coop Bank to account, and one day bring it back into cooperative ownership. The CUEB came out of the Save Our Bank campaign, launched in 2013 with support from Ethical consumer, after the Coop Bank was compelled to sell most of its shares to private investors in order to survive.

Building Society savings accounts

Savings accounts are also offered by building societies, which have traditionally been a more ethical choice than the big banks.

In our rankings, building societies all get a positive Company Ethos mark for being ‘mutuals’, i.e. owned by and run for their members. All customers are members and are able to vote at AGMs or stand for election to the Board.

Regulations stipulate that at least 75% of a building society’s assets must be held in residential property mortgages, so they are much less likely to be lending to companies with dubious ethical records.

So far as we can tell, most do a little lending to companies but almost always to small businesses to buy commercial buildings in their local areas.

All building societies do mortgage lending and most offer ISAs as well as savings accounts.

Three of them – Coventry, Cumberland, and Nationwide – also do current accounts. Many offer services nationwide but others are only open to savers in a specific region.

To find your local building society, search the members list on the Building Societies Association website. We have only covered 11 of the 43 building societies in the UK due to space and resources.

Ecology Building Society is another member of the Global Alliance for Banking on Values. It focuses on mortgage loans to make homes more energy efficient and loan support to community-led affordable housing and individual renovation projects, developing many inspiring examples of low impact living. It also participates in various policy initiatives aiming to deliver mass retrofit of homes, and in new European criteria for green mortgages.

Since 1981 it has lent to over 3,000 projects. In 2019 90% went to residential properties including sustainable new build, renovation and conversion, and 10% went to commercial and community projects including woodlands, housing cooperatives and shared ownership. Ecology BS offers Cash ISAs and Easy Access 90-day Notice, and Regular Savings accounts.

In March 2016 it became the first building society to receive the Fair Tax Mark, demonstrating its openness and transparency regarding its tax affairs.

In December 2018, Leeds Building Society also became Fair Tax Mark accredited, becoming the first national high-street financial institution certified by the FairTax Mark.

Credit unions

Credit unions are a widespread but lesser known option for savings accounts and other financial services. As there are around 400 in the UK, we have not included them on our table, but we do recommend them for ethical savings accounts.

Like building societies, they are mutuals owned and controlled by their members, not by external shareholders pushing for maximised profits through dodgy investments and shareholdings.

Credit unions pool their members’ money to make small loans in the community, providing an accessible and affordable alternative to the high interest rates charged by payday loans and loan sharks.

Credit unions pay out an annual dividend to savers, based on the annual profit made, and some pay interest too. There are lots of ways to pay in, including direct deductions from your wages.

To find your local credit union, search the Find Your Credit Union website run by ABCUL – the Association of British Credit Unions.

Also see our feature about saving with credit unions.

​​​​​​Islamic banking

Interest is forbidden in Islam. Islamic banks thus theoretically avoid it, using a variety of methods. The main ones are either buying an item for a customer and then leasing it back to them, or using a profit-and-loss sharing paradigm, in which borrowers and depositors share profits and losses with the banks.

However, in practice, most Islamic banking is actually very similar to standard banking. For example, the bank ‘sells’ a stock of gold to a customer, with payment to be made monthly over a year; the customer then immediately ‘sells’ the gold back, for a sum of cash that is somewhat less than the amount that they will pay over the year. In other words, they end up with what is basically a standard loan, with a standard interest rate.

There is one Islamic bank in these guides – Al Rayan. Al Rayan is 30% owned by Qatar Holdings LLC, which is 100% owned by the Qatar Investment Authority. The state-owned QIA was set up to manage profits from oil and gas, and Qatar Holdings also owns Harrods, and has investments in Heathrow (20%), Sainsbury’s (22%) and Volkswagen (15%).

The football World Cup is due to be held in Qatar in 2022, but work on the stadium, transportation and hotels has received international criticism for abuse of workers’ rights. Migrant workers make up about 95% of Qatar’s labour force, and the country is criticised by Amnesty International, for its record on freedom of expression, migrants’ rights, womens’ rights and LGBTi rights.

Government supported savings schemes

Until September 2023, if you are receiving Working Tax Credit, Child Tax Credit or Universal Credit and earn over a certain amount from paid work each month you can apply for a Help to Save account from NS&I. This allows you to save up to £50 each month, with a maximum bonus payment of £600 from the Government at the end of years two and four.

If you are aged between 18-39, you can open a Lifetime ISA (LISA) account, which is specifically to save for a first home, or retirement. You can save up to £4,000 a year and receive a maximum bonus of £1,000 each year until you are 50. However, it does not do better than a pension, except perhaps for self-employed basic-rate tax payers. Not many brands offer LISAs but Paragon, Newcastle Building Society and Skipton Building Society do.