Understanding Shariah-Compliant Lifetime ISAs: A Guide to Saving for Your Future

In recent years, Lifetime Individual Savings Accounts (LISAs) has gained popularity as a tax-efficient way to save for a first home. However, for Muslim savers who follow Shariah principles, the availability of Shariah-compliant LISAs can be limited. In this article, we will explore what Shariah-compliant Lifetime ISAs are and how they can be practical tools for saving for your future while adhering to your religious beliefs.

What is a LISA?

Lifetime ISAs are designed for individuals aged 18-39 to help them save for a first home and/or later in life. You can save up to £4,000 a year and Government will add a 25% bonus to the money saved up to £1,000 per tax year.

What is Shariah-Compliant?

A Shariah-compliant LISA (Sharia Lifetime ISA) is a Lifetime ISA that complies with Islamic finance principles. This ensures money is only invested in a portfolio of Shariah compliant shares which prohibit investments in activities or industries including gambling, alcohol and tobacco.

A Shariah Supervisory Board will ensure the investment meets Shariah Investment Guidelines including charging or paying interest (Riba). Instead of charging or paying interest, these accounts use alternative mechanisms such as profit-sharing, leasing, or joint ventures. Providing a Shariah-compliant way to save for your future.

Why are Shariah-compliant LISAs important?

For Muslims, adhering to Shariah principles is essential to their faith. Investing in a Shariah Compliant ISA provides those of a Muslim faith the opportunity to invest for their future in way that aligns with their beliefs.

Investment providers offering Shariah Compliant funds will have a team responsible for the management of the fund. Shariah LISAs will pay an ‘expected profit rate’ rather than interest. You money will be used to buy and sell Shariah compliant stocks with the aim of generating profit of which a share is passed on to you. It is called ‘expected’ profit rate as return isn’t guaranteed as all investments carry a level of risk.

Any provider of Islamic finance products or services in the UK will need to be registered with the relevant regulatory authorities and follow applicable guidance. This means customers will have peace of mind in the unfortunate event a company is unable to pay out.

How can you invest in a Shariah-compliant LISA?

Investing in a Shariah-compliant LISA can be challenging as there are currently limited options in the UK market. However, Foresters Financial now provide a , which can help you take your first step onto the property ladder and still adhere to Islamic law.

Before investing in a Shariah-compliant LISA, it is essential to research and ensure that the provider and the investments in the LISA are Shariah-compliant. This will ensure that your savings will not support industries or companies that do not align with your beliefs.

Final Thought on Shariah LISA’s

Shariah-compliant Lifetime ISAs provide an easy way for 18-39-year-old Muslim investors who want to save for their future while adhering to their religious beliefs. These accounts provide a way to invest towards your first home and/or later life. Although the availability of Shariah-compliant LISAs is currently limited, it is essential to research and invests with a reputable provider compliant with Islamic financial principles.



About Lisa Baker, Editor 2419 Articles
Lisa Baker is the Editor of Always Finance, and writes about Business, Finance Technology and Healthcare. Lisa is also the owner of Need to See IT Publishing.