Are pension payouts included as part of the estate?

In the Name of Allah, the Most Gracious, the Most Merciful.

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.

Sister in Islam,

There can be two scenarios applicable to your query:

1) Your husband voluntarily subscribed to the pension fund and your husband paid premiums from his own account.

2) Your husband was forced to subscribe to the pension fund, and the premiums were automatically deducted from his salary without coming into his possession.

There are also two aspects to the pay-out. The principal amount (actual premiums paid) and the surplus amount (the pension fund pay-out).

1. If your late husband voluntarily subscribed to the pension fund, the principal amount that was contributed by your husband will form part of the estate.

The surplus money, not the principal amount, will have to be given away in Sadaqah due to it being contaminated with interest. However, if the heirs or family are needy, then it will be distributed amongst them without the intention of reward.

2. In principle, an employee is entitled to his entire salary.[1] In the case where a company forces the employee to participate in a pension fund and deducts a portion from his salary, the employee does not receive his entire salary. This is regarded as a debt upon the employer.[2]

The principal amount that was contributed by your husband will form part of his estate. The surplus will be regarded as a gift to whoever has been named the beneficiary even if he/she is a Shar’i heir.[3]

And Allah Ta’āla Knows Best

Hasan Ahmed Razzak

Student – Darul Iftaa

Paterson, New Jersey, USA

Checked and Approved by,

Mufti Ebrahim Desai.