Active Savings, launched last year, enables investors to open a single account and move money between accounts from different banks and building societies without having to complete another application.
The service has partnered with BLME which follows the Sharia belief that interest should not be paid on savings. Instead, the money is pooled and invested in a number of ethical companies, excluding those involved in alcohol, tobacco, arms or gambling. Savers earn a share of the bank’s profits instead of an interest rate.
Gbi2 managing director Graham Bentley told Portfolio Adviser very few banks in the UK offer this. “Gatehouse is a challenger bank that does, and I believe Lloyds still does, but the remainder are mostly Arab banks,” he said.
Bentley added: “I think it’s a sensible move to allow those who cannot or will not earn money at interest, or who want to be sure their money is avoiding tobacco, arms, gambling etc, to have an opportunity to save.”
The best rates
The Sharia bank offers market leading rates on one, two and five-year fixed rate bonds and will be available on Hargreaves’ Active Savings platform.
Hargreaves Lansdown head of communications Danny Cox said: “Sharia banks offer some of the best rates around – particularly when it comes to fixed rate savings – and make the rates from the high street giants look like puny small fry.
“A one-year fixed rate account from the Bank of London and the Middle East offers three times the interest of a high street alternative.”
Similarly, Bentley noted Sharia accounts typically pay a higher profit rate than a “normal” bank interest rate.
He this could be appealing for those holding cash, as long as they understand it’s not interest, but essentially equity.
“It’s not a niche area – these accounts are not just for Muslims, but anyone who prefers to ensure their money is invested ethically can access Sharia-compliant accounts,” he added.
Cox explained that while Sharia accounts may be less recognisable to UK savers, they are protected by the Financial Services Compensation Scheme and “getting to grips with them could prove highly rewarding”.
He added: “Partnering with BLME, its first Sharia bank partner, has brought more market leading rates to Active Savings.”