Investing into Shares and Pension Schemes

Fatwa ID: 04794

Answered by: Mufti Mohammed Tosir Miah

 

Question

 

Are we able to invest in shares if it is halal dealing and in the case of the pension fund if the pension fund is of halal earning shares and after maturity, they will pay the amount on sum matured every month, is it halal or haram 

 

 

In the name of Allah, the Most Beneficent, the Most Merciful.

 

Answer

 

Your question will be looked at in two parts. Firstly, we will look at the ruling and the conditions which need to be found for the permissibility of buying and selling shares. Secondly, we will look at the Islamic perspective of pension schemes. 

 

There is a difference of opinion amongst the scholars with respect to whether buying or selling shares is permissible. Mufti Taqi Usmani (DB) has given permission on buying and selling shares on the basis of the following:

 

  1. The company in its original form is not involved in unlawful trading i.e. it is not a bank, insurance, or an alcohol company.
  2. The company’s assets should, not be in liquid form (not in the form of cash) but have acquired some fixed assets as well.
  3. A voice should be raised (protest) against the dealings of interest despite it being rejected.
  4. When the profits are distributed out then whatever percent has been received from interest should be given out as sadaqah.  (Fiqhi Maqalaat p.151 v.1 & Jadeed Fiqhi Masaail p.390 v.1)

 

With regards to the third condition, the views of my respected teachers of Darul Uloom Bury are that this condition only applies in an Islamic country such as Pakistan where objections may be raised against the company for dealing in interests and not in non-Muslim countries. Therefore, it will be permissible for you to buy and sell shares even though you do not have the chance to raise an objection against them. 

 

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. 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. 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 (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)

 

 

Only Allah Knows Best

Written by Mufti Mohammed Tosir Miah

Darul Ifta Birmingham

 

 

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