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Savings Policy

Answered according to Hanafi Fiqh by Askimam.org

I had a query about the shariah compliance of a savings policy that I took out few years ago. The policy is a systematic investment plan where I pay fixed monthly amount. The amount is then invested in funds that have been selected by me based on advise from my fund manager. At the moment I have two investment funds and they are both certified to be halal by their respective shariah boards. The investment plan is for 15 years and I have completed 5.

The company that I have my plan with has the following charges:

1.) 4% of the amount that I will be investing for the first 18 months. This charge is fixed irrespective of I make a profit or loss on the investments.

2.) 0.75%/year of the final value of the policy

3.) 7.5USD/month fixed charge

The company also provides a life insurance  for 50,000USD.

If I decide to forfeit the policy now I will be charged the charges applicable in item 1.) above. 

Can you kindly advise if the above is legal for me to continute with or should I forfeit. If I forfeit I will loose about 8 to 10,000 USD.

If the life insurance part is not halal then I can ask the company to cancel that benefit (if at all possible) and will that make it halal?

Answer

In the Name of Allah, the Most Gracious, the Most Merciful.

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.

You state that your monthly contributions of your savings policy is invested in Halaal funds supervised by their Shari’ah Board. In determining Shari’ah compliancy, it is important to understand the role between the investing company and the investment funds and the Shari’ah Board. 

You may refer to the Shari’ah Board and enquire from them the basis of the three charges and then revert to us. 

And Allah Ta’āla Knows Best

Ahmad Jafari

Student Darul Iftaa
Atlanta, GA, USA

Checked and Approved by,
Mufti Ebrahim Desai.

This answer was collected from Askimam.org, which is operated under the supervision of Mufti Ebrahim Desai from South Africa.

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