Zakaat On A Pension Fund
Question
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, 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?
Answer
Zakaat is not payable on a pension fund that is enforced by the employer, as long as the employee does have possession or access to the funds. On receiving part of the funds, the employee will be liable to pay Zakaat (on the payout received), if the funds are still available when calculating his yearly Zakaat.
As for the two thirds that haven’t been released as yet, Zakaat is not due on such amounts as the employee doesn’t have access to the funds. Yes, as explained above, he will pay Zakaat on the amounts received during his lifetime (from the remaining two thirds) when calculating his yearly Zakaat, if it is still in one’s possession at the end of each Zakaatable year. If the funds received have already been spent (prior to calculating one’s yearly Zakaat), then such funds will be exempted
from Zakaat.
The pension payout that one receives after one’s demise does not form part of one’s estate, thus the employee may list a particular individual as a beneficiary of the payout, or he may list some or even all the heirs at the time of his demise as beneficiaries. That portion will not form part of his estate; rather it will belong to the beneficiary/ies who has/have been designated as the beneficiary/ies.
References (Arabic / Urdu sources)
Contemporary Fataawa of Mufti Taqi Uthmani pg.251/252
- Approved by
- Mufti Muhammed Saeed Motara Saheb D.B.
Where scholars differ, it’s safer to take the more cautious view.
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Source: Darul Ifta, Darul Uloom Azaadville — https://www.iftadua.co.za/zakaat-on-a-pension-fund-2/23689/
Fatawa SA: https://fatawa.co.za/fatwa/azaadville-23689
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