The British public wants banks to lend to organisations and projects that benefit society, but most people do not know what happens to their savings while they are deposited with their bank.

This is one of the findings of a new piece of research conducted by Charity Bank, the ethical bank with a mission to use money for good, as it launches its campaign to persuade the public to transfer their Cash ISA to an ethical provider.

Charity Bank commissioned Opinium to research the attitudes of the general public towards various aspects of banking. This research found that:

  • 74% of the British public don’t know how the money they save in their bank is being used or invested;
  • 71% would like their bank to make it clearer where their money is invested;
  • 56% would like to be an offered an ethical option when choosing a savings account; and
  • 61% would consider opening a savings account that paid a fair rate of interest and lent money to charities and other good causes.

Patrick Crawford, Charity Bank’s Chief Executive, said, “People don’t know what banks do with their money but the findings tell us that there is an appetite to find out and that people would like their savings to be used for good causes.

“Wherever it’s invested, money takes a journey. This might be around the globe, around the big banks or on the stock markets. Sometimes it does good along the way; sometimes it doesn’t.

“When you open a Cash ISA with Charity Bank, we give you a fair rate of interest, whilst making sure your money takes a shorter journey. It spends less time travelling and is invested directly in charities and projects that benefit people across the UK.

Despite the Government’s pension freedoms giving us more control over our money in retirement, new research shows that 40% of people over 40 have no idea of the cost of even a basic lifestyle in retirement, suggesting that more needs to be done to show people how much they need to save in order to be able to afford a decent retirement.1

According to research by Saga Investment Services, four in ten over 40s said they had no idea of the cost of even a basic lifestyle in retirement, with women much more likely to say this than men.  When it comes to understanding the size of the total pension pot they would need to fund retirement, 80% of people admitted they no idea how big this would need to be.

Experts recommend that people should aim in retirement to have two thirds of the income they enjoy while working in order to have the same lifestyle.

Although some people are good at understanding the annual cost of these different lifestyles, when it came to translating that into the size of retirement pot they would need people really struggled, underestimating by around 50%.  One in ten thought you could afford a basic lifestyle on a pension pot of up to £25,000, which would pay £987 a year, but on average people thought you could afford this with a pot of £126,000, which in reality would get you just £6,904 a year.  This demonstrates the retirement leap people need to make in order to make up the difference between ambition and reality.  People in the North East are most likely to underestimate the cost of a basic retirement, thinking this could be achieved with a pot of just £74,000.

When it comes to affording a comfortable retirement, people on average thought this could be achieved with a pension pot of £244,000, which would actually only give an annual income of £13,300, some £7,000 short of target.  Eight out of ten people said they did not know how big a pension pot you would need to achieve a comfortable retirement.

Typically people thought it would take a pension pot of £500,000 to afford a luxury lifestyle in retirement, but this would just pay £27,000 a year, which would leave people two thirds below the real income needed to enjoy a lavish retirement.

Sally Merritt, head of product, Saga Investment Services, commented: “The research proves just how desperately affordable advice and guidance is needed and we urge the regulator to address this.  It is a real concern that people in their 40s and beyond are so unaware of what they need in their pension pot to give them the lifestyle they want in retirement.  People are in danger of becoming pothole pensioners, who face a bumpy road ahead because they didn’t invest well enough when they had the opportunity.