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Annuity Fund

Answered as per Hanafi Fiqh by DarulUloomTT.net

Asalaamu Alaikum,

Supposing someone has an Annuity (personal pension  fund) only to realise after some years that it was Haraam and decided to cancel this fund.

The person invested $3000.00. He received interest $2000.00 from Clico. For cancelling early the govt taxed him $750. Clico  charged him $250 surrender fee for cancelling the fund before it matured.

The person received a final cheque for $4000 (3000 his investment & 1000 interest).
Can he accept the $3000 which he initially invested and give away the $1000 interest?

The $750 govt tax and $250 clico surrender fee total $1000. Can you use the interest to pay it off?

Nb: of the $2000 he initially received in interest can this be used to pay off the govt tax and Clico Surrender fee or does he have to use from his $3000 to pay it off?

Also please note that when someone has an Annuity they receive a tax break from the govt so for the 3yrs he invested his money of $1000 each he was not taxed the 25% of the $1000 which he would have been taxed had he not invested the money. So for the 3 years he had $250 extra in his pocket. Now that he is breaking the annuity fund the govt is taxing him the 25%.

Wa Alaikum Assalaam,

الجواب و بالله التوفيق

The person will accept the $3000.00 which he initially invested and give away the $1000.00 interest. The monies invested by the person is his personal money and so it will be halal for him to accept and use. The additional sum received as interest from Clico is not permissible to use.

The Gov’t tax pf $750.00 and the surrender fee of $250.00 charged by Clico should be taken out and paid from the interest money. One does not have to use from his $3000.00 to pay it off.

And Allah Knows Best.

Mufti Waseem Khan.


This answer was collected from DarulUloomTT.net, which is operated under the supervision of Mufti Waseem Khan from Darul Uloom Trinidad and Tobago.

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