Islamic saving accounts.

Malt290

Hello.
I've read that if you're a Muslim, then you can't technically  earn interest  but can make a profit payment. Is there really much difference  other than the termology used?
Also, can a non-muslim open an account with these banks?
Thanks 

moneysaver1978

Although the article was written in 2019, I think it's still relevant - https://www.moneysavingexpert.com/news/2019/09/al-rayan-bank-launches-tale-topping-savings-account---here-s-wha/

mebu60

No, (though the expected profit is not guaranteed but in my experience it has always been met).
Yes.
HMRC treats expected profit as interest. 

masonic

HMRC treats them no differently for tax. And no, there is no requirement to be of a certain faith. I've been a happy customer of several of these banks and my only belief was in chasing the best rates.

friolento

masonic said:

HMRC treats them no differently for tax. And no, there is no requirement to be of a certain faith. I've been a happy customer of several of these banks and my only belief was in chasing the best rates.

Same here   

allegro120

Malt290 said:

Hello.
I've read that if you're a Muslim, then you can't technically  earn interest  but can make a profit payment. Is there really much difference  other than the termology used?
Also, can a non-muslim open an account with these banks?
Thanks 

Yes, anyone can open an account with Sharia compliant banks. You don't have to be a Muslim. 

In practice there is no difference between 'profit' and 'interest' except 'profit' is not covered by FSCS (capital is still covered).  I've had and still have a number of savings accounts with Sharia banks and never had any problems with them.  Also bear in mind that when you see advertised interest as EPR it is equivalent to 'gross', not AER, so the AER is slightly higher than the published rate.

kimwp

My understanding is that it is not ok within the Muslim faith to make money by lending money - so investments have to be a format where all involved share the risk of gaining or losing.

masonic

allegro120 said:

In practice there is no difference between 'profit' and 'interest' except 'profit' is not covered by FSCS (capital is still covered).  I've had and still have a number of savings accounts with Sharia banks and never had any problems with them.  Also bear in mind that when you see advertised interest as EPR it is equivalent to 'gross', not AER, so the AER is slightly higher than the published rate.

Do you have an authoritative source for that? A Sharia bank is still obliged to pay you any profit that has accrued, so a claim against them under Part 15 FSMA 2000 would include this. The only difference in practice would be that for a fixed term account, where profit would cease at the point of failure, whereas for a conventional account you could elect to hold the account to maturity for full interest.

Malt290

moneysaver1978 said:

Although the article was written in 2019, I think it's still relevant - https://www.moneysavingexpert.com/news/2019/09/al-rayan-bank-launches-tale-topping-savings-account---here-s-wha/

OK, thank you for the link.

Malt290

mebu60 said:

No, (though the expected profit is not guaranteed but in my experience it has always been met).
Yes.
HMRC treats expected profit as interest. 

I wondered if they were treated like mainstream banks.

Malt290

friolento said:

masonic said:

HMRC treats them no differently for tax. And no, there is no requirement to be of a certain faith. I've been a happy customer of several of these banks and my only belief was in chasing the best rates.

Same here   

Don't tell me a regular  saving  account:)