BLME Sharia 1Yr Fixed Rate 2.2%

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Sally57
Sally57 Posts: 205 Forumite
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I am thinking about opening a 1 year fixed rate Sharia account with BLME at 2.2%. As anybody else used BLME or Sharia accounts before? Any views would be really appreciated.
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  • Aidanmc
    Aidanmc Posts: 733 Forumite
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    Hi Sally,
    I have just opened that account, very straightforward process. Opened the account online and 2 days later they sent account number to which deposit funds.No early withdrawal permitted.
    I've had positive experience with Sharia account with Al Rayan bank also. Profit figures have always been accurate.
  • manninman
    manninman Posts: 10 Forumite
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    Sally …
    I have twice in recent years invested with BLME and the whole experience was excellent. I would have no hesitation in recommending the bank [I have no other connection with the bank].
    There are some points to bear in mind with BLME and all sharia-based finance houses. Firstly, you are not earning interest (which is contrary to the sharia); rather, you earn profit by, in effect, investing in a project in partnership with the bank. In principle, the ‘profit’ is not strictly predictable, so theoretically cannot be guaranteed. In practice, if things go badly, the bank will advise you that the return on your investment is going to be less than expected and will allow you to withdraw your funds without penalty. However, you will almost certainly receive the return that you were promised up to that point.
    In addition, because your return is not ‘interest’, it will not be rolled over by the bank in the same way that interest can be compounded from year to year. Presumably, for this reason, the investment is not available as an ISA, although I wonder whether there might not be a case for arguing that a sharia investment should be available in a S & S ISA.
  • masonic
    masonic Posts: 23,275 Forumite
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    I hold a few of these accounts now. Have had no issues with BLME, bear in mind there is no online access.
    manninman wrote: »
    In practice, if things go badly, the bank will advise you that the return on your investment is going to be less than expected and will allow you to withdraw your funds without penalty. However, you will almost certainly receive the return that you were promised up to that point.
    Not just almost certainly. All accrued 'expected profit' is guaranteed and backed up by FSCS protection. The only way BLME could renege on accrued interest profit is to go into administration, in which case all capital and accrued interest profit would be paid out by the FSCS. The worst case scenario is a rate change mid-term, with the option to withdraw without penalty.
    In addition, because your return is not ‘interest’, it will not be rolled over by the bank in the same way that interest can be compounded from year to year. Presumably, for this reason, the investment is not available as an ISA, although I wonder whether there might not be a case for arguing that a sharia investment should be available in a S & S ISA.
    BLME pays interest profit annually to an external account, while other Sharia compliant banks are happy to compound interest profit and pay it out at maturity. Other Sharia compliant banks do have ISAs available. Compounding and ISA availability appear to be a provider choice, rather than a Sharia restriction.
  • Notsop
    Notsop Posts: 11 Forumite
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    If its not interest you would think it would not count towards your yearly £1000 HMRC tax free interest allowance, but instead towards your CGT allowance.

    But I guess not.
  • masonic
    masonic Posts: 23,275 Forumite
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    Notsop wrote: »
    If its not interest you would think it would not count towards your yearly £1000 HMRC tax free interest allowance, but instead towards your CGT allowance.

    But I guess not.
    It's closer to a dividend than a capital gain, but HMRC is perfectly capable of determining which category of income it belongs to, and it's the same one as bank interest and P2P lending income.
  • Sally57
    Sally57 Posts: 205 Forumite
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    masonic wrote: »
    BLME pays interest profit annually to an external account, while other Sharia compliant banks are happy to compound interest profit and pay it out at maturity. Other Sharia compliant banks do have ISAs available. Compounding and ISA availability appear to be a provider choice, rather than a Sharia restriction.

    So just to clarify/confirm, as a non earner if I invested £30K into BLME for a year and the 'profit' was £660 then although this is not exactly classified as 'interest' it should still be included in my £1000 tax free savings allowance?
  • poppy10_2
    poppy10_2 Posts: 6,575 Forumite
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    Sally57 wrote: »
    So just to clarify/confirm, as a non earner if I invested £30K into BLME for a year and the 'profit' was £660 then although this is not exactly classified as 'interest' it should still be included in my £1000 tax free savings allowance?
    Yes. Allah won't class it as interest but HMRC will
    poppy10
  • eskbanker
    eskbanker Posts: 31,034 Forumite
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    Sally57 wrote: »
    So just to clarify/confirm, as a non earner if I invested £30K into BLME for a year and the 'profit' was £660 then although this is not exactly classified as 'interest' it should still be included in my £1000 tax free savings allowance?
    If you're a non-earner then the income may fall within either your £12.5K personal allowance or the £5K starting savings rate rather than the £1K personal savings allowance as such....

    https://www.moneysavingexpert.com/banking/tax-rates/
  • matty_art
    matty_art Posts: 219 Forumite
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    I’ve just applied for this account with BLME - what I didn’t realise at the time is that there is no online access.

    I’ve just had a letter through the post with bank details to pay my deposit into - however professional experience of dealing with paying suppliers means I don’t feel overly comfortable just paying in based on a letter with no ability to confirm accuracy of these bank details online - I’m sure it’s fine but I’m an accountant and heard scare stories so not really best practice from BLME!

    I presume everyone else received a letter with the bank details too?
  • Aidanmc
    Aidanmc Posts: 733 Forumite
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    Yes this is how its done, they will probably send an email also with the details. You could also phone them to double check if you wish. After you transfer the funds and in the account you will receive confirmation. Quite straightforward really.
    matty_art wrote: »
    I’ve just applied for this account with BLME - what I didn’t realise at the time is that there is no online access.

    I’ve just had a letter through the post with bank details to pay my deposit into - however professional experience of dealing with paying suppliers means I don’t feel overly comfortable just paying in based on a letter with no ability to confirm accuracy of these bank details online - I’m sure it’s fine but I’m an accountant and heard scare stories so not really best practice from BLME!

    I presume everyone else received a letter with the bank details too?
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