I am employed in an organization where monthly deduction is made on account of Gratuity and Pension Funds (GPF). These funds are given at the time of retirement to the employee.
The employer invests these funds . There are 02 categories of GPF interest bearing and non -interest bearing . But at the end of the employer the funds are not invested separately.
Employees have a option to withdraw amount as loan from these fund. Now if the employee has selected interest bearing GPF he will have to pay interest on the withdrawn amount and if he/she has selected non-interest bearing GPF interest isn’t paid on the withdrawn amount.
Kindly clarify which GPF should the employee opt or he should be indifferent. As there has been verdict that GPF isn’t the ownership of the employee and he has no rights with respect to investment .
Wa’alaykum as Salam wa rahmatullahi wa barakatuhu,
If the pension/provident fund is voluntary and one is not compelled by company policies to participate in the fund, then it is not permissible for one to participate in the fund, and thus, at most, he can ask only for his capital. This is irrespective whether one waits till retirement, or withdraws earlier.
However, if you do not have any choice, then funds given to you at the time of retirement will be a gift from the companies side. Hence, it will be permissible for you to accept the total that is given (capital plus profits). However, it will not be permissible for you to demand any funds, and if you do not get any payout, there is absolutely nothing that you can do.
In both the above cases, if the fund agrees to loan you funds earlier, you may only request a non interest-bearing GPF. It will not be permissible to pay interest on any funds which you withdraw.
And Allaah Ta’aala knows best
Ismail Moosa (Mufti)