1 Month
Ask Rachel
Working in the financial industry for over 30 years, Rachel Thrussell is the leading independent expert on UK savings products. Her views are constantly in demand from both the industry and the press.
Why do some accounts pay expected profit rates? Are the rates not guaranteed?
The accounts that pay expected profit rates are Sharia’a-compliant savings accounts, which do not pay interest due to this being against Islamic law. Instead, depositors’ funds are invested into Sharia’a-compliant activities, avoiding prohibited businesses such as alcohol, tobacco and gambling, which go against Islamic principles. As there is always an element of risk with investments, Sharia’a banks cannot therefore guarantee a rate of return. However, the banks mitigate this risk in many ways, so that the customer’s deposits and return do not suffer. For instance, Bank of London & The Middle East (BLME) states that if a customer’s deposit is not producing the agreed profit rate, the account can be closed early without penalty, the original deposit will be returned in full and the profit at the original Expected Profit Rate will be paid anyway. In addition, to date, Al Rayan Bank states that it has always achieved the expected profit rate offered to its customers.
This week's
average rates
| No Notice | 0.64% |
| Notice | 1.10% |
| Cash ISA | 1.30% |
| 1 Year Fixed Rate Bond | 1.48% |
| 2 Year Fixed Rate Bond | 1.65% |
| 3 Year Fixed Rate Bond | 1.88% |
| 4 Year Fixed Rate Bond | 2.16% |
| 5 Year Fixed Rate Bond | 2.14% |
| 12 February 2019 | |
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NS&I lowers Premium Bond investment level
Premium Bonds are now accessible to more people than ever after National Savings and Investments (NS&I) earlier this month lowered the minimum amount required to invest in a bond for the first time in the product’s 63-year history.
As a result, those aged 16 and over can now invest in the ever-popular bonds from just £25, compared with the previous minimum requirement of £100. In another move aimed at encouraging regular saving, customers will be able to set up standing orders to purchase a minimum of £25 to save on a regular basis (the current minimum is £50). Parents and grandparents are also able to purchase a minimum of £25 for under 16s, as well as setting up a standing order. At some point in the future, NS&I will also be allowing all adults to purchase Premium Bonds for under 16s.
One in three people in the UK hold Premium Bonds, which give savers the chance every month to win tax-free prizes ranging from £25 to £1 million. Every £1 bond number has a separate and equal chance each month of winning a prize of any value, with the prize pool currently on offer translating to an estimated interest rate of 1.4%. Importantly, savers are guaranteed never to lose their original investment, and funds can be withdrawn at any time.
However, what savers must remember is that a win, and therefore a return, is not assured – the odds of an individual £1 bond number winning any prize is 24,500 to 1. The absence of regular wins would leave the original investment vulnerable to the effects of inflation and could see its purchasing power erode over time. That money held with NS&I is 100% secure, by virtue of its Treasury-backed status, is a decisive factor for many people who hold Premium Bonds. The maximum that a saver can now hold in Premium Bonds is £50,000.
“I am delighted that people up and down the country can start a savings habit more easily by investing just £25 in Premium Bonds,” said Ian Ackerley, chief executive at NS&I. “Investing in Premium Bonds provides the opportunity to win tax-free prizes, while ensuring that your money is 100% secure. Lowering the minimum investment on Premium Bonds is part of how we can support a stronger savings culture across the country and help those who want to be able to save little and often, and for those who want to give the gift of savings to their loved ones.”
Michael Mercieca, CEO of the financial education charity Young Money, added: “It is crucial for young people’s futures that they can manage their finances appropriately, and this includes striking a balance between spending and saving. This reduction in the investment threshold enables young people to access this long-standing NS&I product more easily.”
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