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Pension Funds

Answered according to Hanafi Fiqh by TheMufti.com
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Q. It is compulsory for employees to invest a portion of their salaries in a Pension Fund. After retirement, employees have access to one third of the entire fund. Thereafter, the two thirds of the fund will be paid to employees on a monthly basis. If an employee passes away, the remainder of the two thirds of the fund will be given to the beneficiaries of the fund. What portion of the fund forms part of one’s estate and what portion of it is Zakaatable?


A. In the enquired situation, if the Pension Fund is compulsory and an employee had no choice but to invest in it, then the funds issued by the Pension Fund to the employee will belong to the employee.

In view of the situation in reference, the employee will only be liable to pay Zakaat on the one third 1/3 of the funds accessible after retirement including the monthly pay out received from the fund based on one’s personal financial situation. The employee will not have to pay Zakaat on the compulsory Pension Fund for the previous years’ investment in the fund or the two thirds 2/3 of the fund retained after retirement as he did not have a choice in investing in the fund and neither did he have access to any portion of it.

After retirement and in the case of an employee’s demise, the remainder of the two thirds 2/3 of the funds will belong to the beneficiaries of the fund. The two thirds 2/3 of the funds will not form part of the deceased estate but will belong to the beneficiaries of the deceased.

Allah Ta’ala Knows Best

Mufti Ismaeel Bassa

This answer was collected from TheMufti.com, which is a fatwa portal managed by Mufti Ismaeel Bassa from South Africa.

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