I have invested into a workplace pension with my employer into the only Shariah compliant fund available, HSBC Islamic Global Equity and my pension provider wrote to me today to say that the minimum cash value held on the plan accrues interests as per the following:
“Whilst the Aegon HSBC Life Islamic Global Equity fund is fully compliant with Sharia law principles, your ARC account that holds your investment may not be. To cover the charges that are applied to your plan, your ARC account includes a cash facility. A minimum of 0.25% of the value of your plan is held in the cash facility which ensures there are sufficient funds available to pay the charges applied to your plan. Interest is accrued on this cash facility and paid at 0.05% below the Bank of England base rate (as at October 2021). Therefore, your overall ARC plan may not be fully compliant with Sharia Law principles.”
I am assuming the interest from the cash component of the fund needs to be purified in the form of giving away this amount to charity?
Slightly confused by the wording when they say, “…paid at 0.05% below the Bank of England rate.” Does this mean the amount of interest accrued would be a total of 0.05%? (0.1% - 0.05% = 0.05%) , given the current interest rate is 0.1%.