Zakaat on pension fund withdrawal
Question
I intend leaving my employer at the end of the year for another employment, inshAllah.
How do I calculate my pension fund withdrawal. I have been working at my current employer for 4.5 years.
Should i calculate 2.5% on my withdrawal amount or should i work out the zakaah on each year going back?
What is the permissibility of the growth on the contributions?
This was a compulsory fund administered by Momentum pension funds.
Answer
In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
Since the pension in reference is mandatory and you do not have any control over the investments, then the income you receive from this plan will be halal for you to take. The final amount you receive will be counted as part of your salary[1]including all extra amounts you receive upon leaving the company.[2]
With regards to Zakāt on mandatory pension funds, you are neither obligated to pay Zakāt for the previous years nor upon receiving the money. There is no separate Zakāt for monies invested in a mandatory pension fund.[3] At the end of your Zakāt year, the pension amount that you have withdrawn, should be added to your assets and Zakāt should be calculated in accordance to that.
And Allah Ta’āla Knows Best
- Answered by
- Nabeel Valli (Student Darul Iftaa)
- Checked & approved by
- Mufti Ebrahim Desai
Where scholars differ, it’s safer to take the more cautious view.
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Source: Jamiatul Ulama KZN — https://jamiat.org.za/zakaat-on-pension-fund-withdrawal/
Fatawa SA: https://fatawa.co.za/fatwa/jamiat-14659
People also ask
Is zakaat payable on pension, provident fund or retirement annuity?
“We've previously answered an inquiry regarding Zakat on voluntary retirement savings plans where the employer also contributes. For details, kindly see Ask Imam #29670.”
Ask Imaam · 41 fatawa from 7 Darul Iftas on this
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