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Make money good

17 October 2014

GOOD Money Week is the new name for National Ethical Investment Week. This year, it runs from 19 to 25 October.

Good Money Week seeks to mobilise financial advisers, fund managers, charities, faith groups, and a wide variety of financial organisations to raise awareness during the week of the small but growing sustainable-finance sector in the UK.

Its organisers are also raising a petition to the Government to be more open about how our taxes are being spent to create a healthier, happier society, and to protect the environment.

Lisa Stonestreet, who is managing Good Money Week for the UK Sustainable Investment and Finance Association (UKSIF), says that the term "ethical investment" is often understood too narrowly, as largely a matter of refusing to invest in "sin stocks" such as alcohol or the arms industry; and it may also put off people who think that invest- ment is just for wealthy people with "portfolios".

The message of Good Money Week, however, is that anyone who uses financial products, from a current account to a pension fund, should think about what his or her money might be used for by the people it is deposited with. The website quotes Archbishop Desmond Tutu: "It makes no sense to invest in companies that undermine our future."

Ms Stonestreet explains: "We want everyone to be thinking about the social and environmental impact of their choices, whether they are high-net-worth or not.

"'Good money' is anything that takes such impacts into account. 'Good money' reflects our values, enhances quality of life, safeguards the environment, and protects future generations. We're not talking about one particular strategy, but more of a philosophy - and we want people to feel engaged and empowered by this campaign."

The week has become an annual fixture since it was launched in 2008. "One of our overarching aims is that there should be more demand for sustainable investment and finance, and we'd like to think we have helped to achieve that," Ms Stonestreet says.

"Not least, we have seen many more churches talking about this issue, using our resources, and presenting faith-orientated events, and that's been really encouraging.

"Where we haven't had so much success is in creating mass awareness, and so this year we're focusing on making things both more accessible and more inclusive. In particular, we are targeting students, in the hope that if we can reach people who are just about to enter the workplace, and can get them thinking about sustainability, they will carry on doing so for the rest of their lives."




Mel, 34, wants to think more ethically about her finances. Two independent financial advisers consider her banking, saving and investment options

MEL, aged 34, a deputy head teacher, has been thinking about banking more ethically for a while, but has felt hampered by a lack of knowledge, and time to research what is available. "I've been trying not to think about issues like ethical finance," she says. "It's because I don't understand finance in general. I get letters, and they go straight in a file; I never look at them again."

Mel has a personal account with NatWest, which she admits is purely because of convenience: "I've had that account since I was about ten." She also has a Halifax joint account with her partner, Andy.

Besides savings in NatWest, Mel saves £1000 a month with Halifax, and is interested in what ethical funds, bonds, stocks, etc. might yield a better return. Her savings with NatWest are "online; so I can transfer it quickly, but it's paying no interest whatsoever". She also has Premium Bonds.

Mel and Andy have a four-year-old daughter - one of the last to be given a Child Trust Fund. "Is it possible to opt out of a CTF and go for a children's ISA instead, as these seem more competitive?" she asks. What ethical savings accounts exist if it is preferable to pay into something else? She has bought Premium Bonds for her daughter, as she was bought hers as a child.

"I would also like to know whether it would be financially better to opt out of my teacher's pension; and, if so, how to save that money more ethically. We are particularly keen on green funds."

Savings account: NatWest, balance £8000.

Mortgage: Nationwide, £183,000 owed, 31 years remaining, paying £817 a month.

Instant savers account: Halifax: for paying in £1000 a month, she gets £5 a month.

Premium bonds:  £1500.

Pension:  Teacher's pension (opt-out available).



Martin Andrews, AW Financial Management LLP, says:

You could consider Kingdom Bank for savings, and Reliance Bank for a current account. Both provide online access, and profits are used to fund Christian initiatives in various ways.

Reliance also provide some basic mortgage products, but options are limited. I favour offset mortgages; but, to my knowledge, there are none available from any ethical or Christian banks or lenders. To this extent, you have to consider trading the suitability of a product for the additional benefits to your wider financial planning when making ethical decisions.

With an offset mortgage, you can over-pay on a monthly basis, reducing the mortgage balance and interest payments quicker. If you need funds for a specific task, you can access some of the overpayments back. Furthermore, the interest you are likely to get on any savings is likely to be less than the offset mortgage interest you will save on any credit balances.

You could offset the £8000 in your current account; possibly the £1000 per month saving, too. There is real benefit in reducing your mortgage while interest rates are low, rather than investing in ethical funds. Or you may prefer to invest £500 per month, and use £500 per month to overpay your mortgage.

If you have specific issues that you want to support or avoid, the website www.yourethicalmoney.org provides information on the ethical stance of different products and funds. There is a difference between exclusion on ethical grounds, and engagement on ethical grounds. You would need to decide which option best suits your outlook.

From April 2015, you should be able to transfer your daughter's Child Trust Fund into a Junior ISA, and there will certainly be ethical option(s) available nearer the time.

It would not be prudent to opt out of the teacher's pension scheme because your employer will more than double the contribution you make into the scheme. You could make additional contributions into another pension scheme, as long as the total contribution on your behalf does not exceed the £40,000 per annum annual allowance.

Martin Andrews, of AW Financial Management LLP, has been recommending ethical investment portfolios for clients for more than ten years. He is also executive chairman of the Association of Christian Financial Advisers.



John Ditchfield, of Barchester Green Investment says:

You should certainly remain in the teacher's pension scheme: the current employer contribution is 14.1 per cent, making this a good-quality pension scheme. If you maintain contributions between now and retirement, this scheme should provide a good retirement income, plus lump-sum benefits, in addition to important "insurance-based benefits" at three times your annual salary.

You should instead focus on building up a cash emergency fund, and reducing your mortgage debt - these are priorities, ahead of investments into funds or other assets. Ideally, an emergency fund should be equal to six months of your annual net earnings.

Premium Bonds are quite complex products, with the returns determined at random. I would, therefore, recommend either a simple cash-based account - Santander 123 account offers three per cent on balances over £3000 - or a good cash ISA (there are plenty advertised online). The general rule of thumb is that an online account will offer the best terms over time.

I agree that a Junior ISA would be a better option than the CTF, but the rules prevent a child from having both. You might consider an Open Ended Investment Company (OEIC) designated in favour of your daughter, however, as this could be transferred to a JISA once the rules eventually change (expected in April 2015).

In terms of moving to an ethical bank, Co-op, Triodos, or perhaps a building society such as Nationwide would probably be the most practical solutions.

John Ditchfield is a director of Barchester Green Investment, the largest and longest-established specialist in responsible investment in the UK, with a 20-year track-record of financial planning for individuals, charities, and businesses, including WWF-UK and Greenpeace.


The details given above are for information purposes, and must not be considered advice.




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