Fixed Rate Bond

SweepDog

I have been trying to take out a fixed rate bond through Raisin and Gatehouse Bank PLC.

Been a traumatic 2 weeks as my money has only appeared in the account yesterday and now they are saying the original rate of 2.17 has been withdrawn and I have to apply again.

On their dashboard there are various options of bonds and the one I want to take out is again through Gatehouse at 2.10 fixed rate for 12 months. However I am concerned with a paragraph under 'important information' and I wondered if someone could explain it too me and its risks.

"This account is administered by Meteor Asset Management and Meteor Investment Management who process your application and cash respectively. Cash and deposits are held in trust where you remain the beneficial owner. All balance and transaction data is provided by Meteor Asset Management, acting as Bare Trustee. Sharia Banking - Make good offer refusal: Sharia-compliant banks can make good the amount of any shortfall that you may have suffered if your deposit amount returns a loss. You shall therefore be entitled to receive payment from these banks of the full amount that you had previously deposited through applications completed on Raisin UK. You are entitled to refuse this offer. You can do this by sending an email to service@raisin.co.uk with the subject “Make good opt out”. If you do not refuse this offer, you shall therefore be entitled to receive payment from the bank for the full amount that you had previously deposited. We would like to draw your attention to the guidance offered by each bank’s Sharia Supervisory Board. The guidance is that if the bank needs to make good the amount of any shortfall (set out above), this will not comply with Sharia principles."

thanks in advance
:j

dunstonh

However I am concerned with a paragraph under 'important information' and I wondered if someone could explain it too me and its risks.

What about it concerns you?
Are you Muslim and the fact it could be non Sharia compliant?

SweepDog

My concern is that had thought I was taking out a fixed rate bond but the statement appears to say that that could change during the 12 months

Prism

Have you read up on Sharia accounts?

https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/#sharia

Spiggle

Putting on my armour now! I opened the one year fixed rate bond with Gatehouse Bank and it was simplicity itself. Paid deposit one day it was on my Gatehouse account the next day. Furthermore, the people at the end of the phone were really helpful. Now to dent my armour with all the arrows - I did not and would not go through raisin as an intermediary.

I just didn't feel at my level of deposit (£10k) the financial enticement - sorry inducement - was sufficient to confuse the issue and have money moving from one institution to another and then to Gatehouse eventually. Too much complication for too little reward.

It appears that the 'Important Information' is about and from raisin rather than to do with Gatehouse/Sharia banking.

No, I'm not Muslim but fully comprehend the Sharia banking system.

All the best,
Spigs

andi2

If you go directly to Gatehouse it tells you that the rate isn't guaranteed, however they have never yet paid out below what they have said.


It also says that if it looks like they won't be able to pay the initial rate they will tell you & release your money (with profit to date) if you're not happy with the new rate.


I didn't look at them via Raisin, but I didn't have any issues with the T&Cs going directly with them.



https://gatehousebank.com/personal/savings/fixed-term-deposits/1-year-fixed-term-deposit

Ecnurev

Spiggle wrote: »

Putting on my armour now! I opened the one year fixed rate bond with Gatehouse Bank and it was simplicity itself. Paid deposit one day it was on my Gatehouse account the next day. Furthermore, the people at the end of the phone were really helpful. Now to dent my armour with all the arrows - I did not and would not go through raisin as an intermediary.

I just didn't feel at my level of deposit (£10k) the financial enticement - sorry inducement - was sufficient to confuse the issue and have money moving from one institution to another and then to Gatehouse eventually. Too much complication for too little reward.

It appears that the 'Important Information' is about and from raisin rather than to do with Gatehouse/Sharia banking.

No, I'm not Muslim but fully comprehend the Sharia banking system.

All the best,
Spigs

Hi all,

I have been planning to put some money in one of the savings products offered in Raisin UK.

I have good references about Raisin in Spain as my father has used them several times with no issues at all. However, when checking the products currently available in Raisin UK I don't really trust what I read. The products currently available are either complying with Sharia law (there is something called Wakala fee* that is completely unknown to me), or based in Nigeria/India. My mistrust might just be based on my own ignorance, so that's why I'd like to hear your opinions. Specially if anyone has already used them.

Thanks very much.

PS: This is what the Terms and Conditions say about that Wakala fee:

• We shall be entitled to the Wakala fee and we shall be entitled, as an incentive, to retain any profit generated by investing your Deposit Amount exceeding the Expected Profit Rate.

• We will waive our Wakala Fee with you of GBP100

Any thoughts on that?

Goudy

There are a few different investment/banking (Takaful) models used under Sharia law.

Straight Wakala contracts, it's what you might consider an agents fee.

Funds are held in a pool with others, when a claim or profit is made, it is made in/out of this pool. The one that manages this pool, the operator or agent is called the Wakil.

If the funds out perform, the extra goes back into the pool for everyone to share (plus some is usually set aside for charity), in the case of insurance that pool probably won't make a profit, so the Wakil will be paid a straight fee or Wakala.


The other banking system (Mudaraba), is more related to making profits rather than pooling money for insurances.
Now anything the pool makes above the expected profit rate that is quoted is kept by the Wakil as a Wakala.
So you and everyone else fund the pool with a target of say 2% profit and the Wakil works hard and achieves 3%, the Wakil will take this extra 1% as the Wakala.

There's also a system that blends the two.
The Wakil will take a management fee and also a share of the profit rather than all above a quoted percentage as Wakala, this is seen as a bit fairer.

Here they are telling you what they will actually do, which is keep any extra profit your fund makes above the quoted percent, though you can buy out of this if you wish and share in all of it for £100.

"This is what the Terms and Conditions say about that Wakala fee:
We shall be entitled to the Wakala fee and we shall be entitled, as an incentive, to retain any profit generated by investing your Deposit Amount exceeding the Expected Profit Rate.
We will waive our Wakala Fee with you of GBP100"

Ecnurev

Goudy wrote: »

There are a few different investment/banking (Takaful) models used under Sharia law.

Straight Wakala contracts, it's what you might consider an agents fee.

Funds are held in a pool with others, when a claim or profit is made, it is made in/out of this pool. The one that manages this pool, the operator or agent is called the Wakil.

If the funds out perform, the extra goes back into the pool for everyone to share (plus some is usually set aside for charity), in the case of insurance that pool probably won't make a profit, so the Wakil will be paid a straight fee or Wakala.


The other banking system (Mudaraba), is more related to making profits rather than pooling money for insurances.
Now anything the pool makes above the expected profit rate that is quoted is kept by the Wakil as a Wakala.
So you and everyone else fund the pool with a target of say 2% profit and the Wakil works hard and achieves 3%, the Wakil will take this extra 1% as the Wakala.

There's also a system that blends the two.
The Wakil will take a management fee and also a share of the profit rather than all above a quoted percentage as Wakala, this is seen as a bit fairer.

Here they are telling you what they will actually do, which is keep any extra profit your fund makes above the quoted percent, though you can buy out of this if you wish and share in all of it for £100.

"This is what the Terms and Conditions say about that Wakala fee:
We shall be entitled to the Wakala fee and we shall be entitled, as an incentive, to retain any profit generated by investing your Deposit Amount exceeding the Expected Profit Rate.
We will waive our Wakala Fee with you of GBP100"

Let me see if I got this right.

When you mention the case when the funds out perform I guess that is what you are expecting to happen in this type of investments, right? The amounts you mention that are set aside for charity or that are part of the agent's fee, are they taken from the interest that should belong to you?

It seems that the product I'm interested in uses that Mudaraba system you've mentioned, because your explanation fits quite well with the Terms and Conditions I have mentioned before. However, I still don't understand the last point: "We will waive our Wakala Fee with you of GBP100". Do you know what is it referring to?

Thanks!

Ecnurev

Could anyone add more clarity on how those sharia compliant investment work?