Answered by: Mufti Eunus Ali
Question
Dear Mualana/Mufti Sahab,
I work for BT and they have a retirement Scheme based on Government Pension Scheme. Every month BT takes 6% of my Salary and adds this to a Pension fund that is looked after by ‘Standard life’ an investment group that looks after BT’s pension scheme.
The main points are as follows:
• When I pay 6% towards my pension fund BT offsets the amount and pays 8% which works out 14% of my salary that is contributed towards the investment fund managed by Standard life.
• The pension fund is invested by Standard life in the property business, financial markets such as banks and bonds which are based on interest dealings.
• The fund is only available to me when I retire
I wanted to ask if it is okay for me to keep paying % of my salary towards my pension fund?
Also, when I retire can only take the money that myself and my employer contributed towards my pension and donate the growth or profit generated from the investment.
Also please note that I will have no access to my money until I am 55 or if I die the money will be given to my nominated family person. Please advise if it is OK for me to keep paying towards the pension scheme.
In the name of Allah, the Most Gracious, the Most Merciful
Answer
The pension scheme might work in the following two ways;
- The government or the employers by law deduct a certain amount from the employee’s salary every month or year etc. This would not be considered riba (interest). It is not a form of insurance where premiums are paid and nor there is an element of gambling or interest involved here.
Furthermore, in Shariah legal ownership is not established until the individual or a representative does not claim the possession.
Hence, when a percentage is cut from the wages of this individual without prior permission possession will not be established. Therefore, the pension received will be considered as a gift or bonus.
However, the problem here is that the money may be invested by the government or the employer to unlawful businesses like banks, alcohol companies, insurance companies, etc.
If they invest money into banks or alcohol companies, then although it will be permissible to take the money as the employee did not have a say or any control of the money, it will be preferred to donate it to the poor without the intention of thawaab (reward). (Raddul Muhtar p.553 v.9)
- The second possible situation is where the employee undertakes the scheme voluntarily.
Mufti Shafee (may Allah have mercy upon him) has written in Nawadir Fiqh, that one should refrain from voluntary pension schemes as these are similarities with riba. (Nawadir Fiqh p.325 v.1)
(Extracted from Fatawa Rahimiiyah p.152 v.3 & Nizamul Fatawa p.213)
Only Allah knows best
Written by Mufti Eunus Ali
Checked and approved by Mufti Mohammed Tosir Miah
Darul Ifta Birmingham