🔔 Don't miss out on market-leading Sharia bonds

Part of the savings landscape for many years now, Sharia-compliant savings accounts are often very competitive, if not market leading. Are you missing out on better rates and knowing that your cash is being used in an ethical way?

As we all know, following years of rates remaining in the doldrums, two/three base rate rises over the last few months means that rates are rising again. That said, the problem is that inflation is rising faster, so savers are struggling to keep up with the rising cost of living, as the returns on their cash is lower.

Which is why squeezing as much as you can from your savings is so important.

The good news is that with the expectation of more base rate rises to come, fixed term bond rates, in particular, have been rising in anticipation.

A year ago, the best 1-year fixed rate bonds available were paying less than 0.60% AER, although the best Sharia- compliant bond was paying a little more, up to 0.65% AER.

But since then, rates have more than doubled - the best 1-year fixed rate bond is currently paying 1.60% AER, but the best 1-year bond from Sharia provider Al Rayan Bank is once again paying more – currently 1.71% Expected Profit Rate (EPR).

Over 2-years and 3-years, Al Rayan Bank is again offering the highest rates of 1.95% and 2.10% EPR, beating its non Sharia competitors.

Is there a difference between Sharia and non-Sharia savings accounts?

Well in short, not really. The key difference is simply that rather than being paid interest, you will earn an Expected Profit Rate.

Islamic banks are founded on faith-based ethical principles that are derived from trade, entrepreneurship and risk-sharing. As money by itself is not considered to be a commodity from which you can profit, no interest is paid or received by Islamic banks. Instead, the providers will partake in Sharia compliant activities with the intention of generating profit, which is then shared.

The ethics and values which underpin Islamic banking include inclusivity, transparency, integrity, respect and fairness.

Islamic banks only use their customers’ deposits for investments which are permitted in Sharia. So, customers’ money will never be invested in gambling, alcohol, arms, tobacco, pornography or any interest-bearing activities.

Although Sharia-compliant savings accounts comply with Islamic law, they are available to any saver, regardless of religion or culture.

As Sharia fixed term accounts pay an Expected Profit Rate (EPR) rather than a fixed interest rate, in order to comply with the strict ethical code of Sharia banking principles, this means that the rate is not guaranteed, although it’s worth noting that to date, the offered EPRs have always been paid on the fixed term accounts, as they are provided with that objective in mind.

And, even if the provider felt that they would be unable to pay the EPR, the providers will offer their customers the option to break the bond, having earned the EPR up to that point.

More importantly however, the providers are fully authorised and regulated in the same way as other banks and building societies and are part of the UK Financial Services Compensation Scheme (FSCS). So, funds of up to £85,000 per person, per bank, are fully protected in the same way as funds deposited with your high street bank.

Sharia-compliant providers have been a firm, and much more visible part of the savings landscape for a number of years now, so now could be the time to give them a go in order to earn the best rates.

Of course, if better rates are round the corner, why would you lock into a fixed rate bond now? Well, the simple answer is that we do not know what will happen to rates and all the time that you are waiting for the next best rates, you are missing out on earning more in the meantime. But don’t restrict yourself to the traditional fixed rate bonds. Find the very best savings accounts to suit your needs.

This is a sponsored article. We are occasionally paid by some providers for marketing services. However, at SavingsChampion we will never accept a payment that compromises in any way our independent, whole of market approach to providing information on the best savings products.