My U.S. government job pays 1% of my salary into a retirement account, but this is ADDITIONAL 1% money they give me, NOT taken out from my paycheck. I’m wanting to know if it’s halal to be a part of this investment because although this account is invested in interest bearing companies and/or bonds, at the same time I am not actively putting any of my salary into these things, it’s almost like a free gift.
In the name of Allah, Most Gracious, Most Merciful
Assalaamu `alaykum waRahmatullahi Wabarakatuh
Ownership of a gift does not take place until the recipient takes possession of the gift. Since your employer deposits the money directly into the retirement account, you will not be the owner of the money until you withdraw it.
As per our understanding, you do not make any contribution towards the retirement account. Rather, it is your employer that provides an amount equal to 1% of your salary into the interest-bearing retirement account.
Since we have not seen the complete details of the scheme, we are unable to provide a clear decision on the issue. However, based on the provided information, there are two scenarios at the time of withdrawing the money:
- The employer withdraws the money from the bank and is responsible for handing over the money to you.
- The employer deposits the money into the bank and the bank is now responsible for handing over the money in the retirement account. You will contact the bank directly to withdraw the money and, should they refuse, you have a claim against the bank.
In the first case, this is a gift from your employer and it is permissible for you to accept the full amount. Once the employer withdraws the money from the retirement account, the harām interest money from the account is mixed with all the other money owned by the employer. Thus, when you receive the money, it will be assumed that the money received is from the halāl money owned by the employer, not the harām (interest) money. This is based on the principal that units of money are not distinguishable (An Introduction to Islamic Finance, pg. 39; Ma’arif). You do not need to inquire into the exact source of the money (Contemporary Fatāwā, pg. 333; Islamiat)
In the second case, the bank hands over the money directly from the account. This money is a mixture of halāl (the 1% principal deposited by your employer) and harām (interest) money. It is not permissible for you to take the amount you know for certain to be interest money. However, it is permissible for you to accept the total principal amount, i.e. the 1% of your salary that your employer contributed to the retirement account.
الملك لا يثبت في الهبة بالعقد قبل القبض عندنا
(Kitāb al-Mabsūt 12/43; Fikr)
لا يتعين الثمن إلا بالقبض
أهدى إلى رجل شيئا أو أضافه إن كان غالب ماله من الحلال فلا بأس إلا أن يعلم بأنه حرام فإن كان الغالب هو الحرام ينبغي أن لا يقبل الهدية
(al-Fatāwā al-Hindiyyah 5/342; Rashīdiyyah)
And Allah knows best
Wassalam u Alaikum
Ml. Abrar Mirza,
Student Darul Iftaa
Checked and Approved by:
Mufti Ebrahim Desai
Darul Iftaa, Madrassah In’aamiyyah