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Responsible savings accounts with a great rate – can you get the best of both?

We look at how Sharia savings accounts could offer you both an ethical alternative to saving and a way to get a better return. Plus get cashback with Active Savings.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

When you save with your bank, you’re indirectly loaning your money to them in return for the interest rate you receive.

The bank will then lend your money out at a higher rate in the form of things like loans, mortgages and credit cards. The difference is called the ‘net interest margin’ and, simply, it’s how banks largely make their money.

The problem with this model is you don’t have control over what banks are doing with your cash. They could lend or invest it with a business or individual that doesn’t align to your values. Your money could unwittingly be used to fund the very things you feel strongly against.

So what if you could add an ethical screen to what banks can do with your money?

Sharia savings products could be the answer. Sharia banks use your money to invest. But they’re different to mainstream banks in that they can’t use your money to invest in anything seen as harmful under Islamic law. That includes businesses that support gambling, tobacco, alcohol or arms.

These banks will usually have a panel of experts to help them make sure their activities comply with these rules.

There’s another key difference. Under Sharia Law, earning or paying interest is not allowed. So instead of offering an interest rate, Sharia banks will pay an expected profit rate (EPR) on their savings products.

In the unlikely event that the agreed EPR might not be reached, affected savers will be contacted and given a choice. Either to continue saving at the new rate, or withdraw all their savings and receive all the profit already earned (at the original EPR). But we’re not aware of any Sharia banks in the UK failing to pay their EPR so far.

The best of both worlds

The positives don’t stop there. You might think that taking an ethical approach to your money risks dampening the return. Not here.

Alongside offering an ethical alternative to traditional savings products, Sharia products often pay some of the best rates in the market.

Regulated Sharia banks also have exactly the same protection in place as most standard UK banks as they’re covered by the Financial Services Compensation Scheme (FSCS). The FSCS protects eligible deposits of up to £85,000 in the event that a financial institution stops trading.

This article is not personal advice.

Boost your cash with Active Savings

Active Savings lets you choose a range of savings products from multiple banks and building societies. This includes Sharia products from Bank of London & The Middle East (BLME).

BLME is currently offering three fixed term products, including a 1 year fix paying a competitive rate of 1% EPR*. As a comparison the average rate for a 1 year fix is 0.44%. On a savings pot of £10,000 you’d be £56 better off after a year. The minimum balance for the BLME product is £1,000 and profit will be paid on maturity.

The best rates on Active Savings

Easy access

Up to
0.35% | 0.35%
(AER | Gross)

Up to 1 year

Up to
0.60% | 0.60%
(AER | Gross)

Up to 2 years

Up to
0.80% | 0.80%
(AER | Gross)

Up to 3 years

Up to
0.60% | 0.60%
(AER | Gross)

Easy access

Up to
0.35% | 0.35%
(AER | Gross)

Up to 1 year

Up to
0.60% | 0.60%
(AER | Gross)

Up to 3 years

Up to
0.60% | 0.60%
(AER | Gross)

Find out more

Please note the products above are some of our most popular, but more are available. Click the link above to see our full range. Products can be added or withdrawn at any time. Minimum deposit requirements apply to individual products. Easy access products pay a variable rate and fixed term products pay a fixed rate.

AER (Annual Equivalent Rate) shows what the interest rate/expected profit rate would be if it was paid and compounded once each year. It helps you compare the rates on different savings products. Once you have opened a fixed term product the rate won't change, but rates on easy access products can vary.

Gross means the rate without any tax removed. Interest/profits are paid gross. You are responsible for paying any tax due on interest/profits that exceed your Personal Savings Allowance to HM Revenue & Customs. Tax treatment can change.

With fixed term savings you can't usually withdraw your money until the term has ended. Inflation can reduce the spending power of money. Easy access products pay a variable rate and fixed term products pay a fixed rate.

Get £10-£100 cashback on your savings

Open an Active Savings account by 2 December, then add at least £10,000 by debit card and choose your savings products within 60 days to qualify for cashback. If your balance drops below your cash offer qualifying amount within 6 months we might reclaim your cashback. Terms apply.

Find out more about active savings

*Expected profit rate (EPR): Islamic banks offer an expected profit rate rather than interest on their savings products in order to comply with Sharia banking principles.

AER (Annual Equivalent Rate) shows what the interest rate/expected profit rate would be if it was paid and compounded once each year. It helps you compare the rates on different savings products.

Gross is the interest rate without any tax removed. Interest/profits are paid gross. You are responsible for paying any tax due on interest/profits that exceed your Personal Savings Allowance to HM Revenue & Customs. Tax treatment can change.

The Active Savings service is provided by Hargreaves Lansdown Savings Limited (company number 8355960). Hargreaves Lansdown Savings Limited is authorised by the Financial Conduct Authority under the Electronic Money Regulations 2011 with firm reference 901007 for the issuing of electronic money.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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