Islamic providers such as Al Rayan Bank and Bank of London and the Middle East offer higher rates (both pay 2pc for a year long bond), although it’s not guaranteed like interest.
Adhering to sharia principals, these providers offer an “estimated” or “anticipated” profit rate which it aims to deliver during the term.
If the banks fail to do so, customers can take their money and the profit earned up to that point at the quoted rate.
While fixed-rate bonds pay more, they do not permit access whereas fixed-rate Isas do – subject to a penalty fee.
BM has a tiered system – how much it charges depends on when customers need to make withdrawals.
Those who require access in the first year will have to pay a fee equivalent to 90 days interest. Withdrawals made in year two will see customers charged 180 days interest.
The BM Isa is also “flexible”. This means customers who do make withdrawals (subject to the fee) can pay the money back into the account in the same tax year, without it impacting their annual subscription.