Pension Scheme

Please can you clarify the position of the pensions we are offered at work. Are we allowed to accept this?

In reference to your question regarding a pension scheme as to whether it is permissible in the eyes of the shariah or not.

The pension scheme might work in the following two ways;

  1. 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 as 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 a 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)
  1. The second possible situation is where the employee undertakes the scheme voluntarily. Mufti Shafee (RA) 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 p152 v.3, Nizamul-Fatawa p.213)

ONLY ALLAH KNOWS BEST

Mohammed Tosir Miah

Darul Ifta Birmingham.

Comments are closed.