Inheritance of a provident fund

Question:-

What is the ruling in regards to the inheritance of a provident fund? Will there be a difference if the provident fund was a voluntary investment, or a non-voluntary investment?

Answer:-

1. A mandatory provident fund when paid out is considered as a gift from the company to the beneficiary/ies stipulated by the employee. It is not necessary that one’s Shari’ee heirs are stipulated as beneficiaries of the fund, nor is it necessary that the funds be distributed according to the Shari’ee law of succession. If an employee, for example, stipulated his wife as the sole beneficiary of the funds then she will be fully entitled to the said funds.

In the case of a voluntary pension or provident fund; the total funds will form part of the deceased’s estate and will have to be distributed in accordance to the Shari’ee law of succession, even though the listed beneficiaries of the fund and their stipulated portions may not be in accordance to the Shari’ee law of succession. It will be the duty and responsibility of the executor to rectify the matter (if not in accordance to Shariah) by ensuring that funds are distributed in accordance to the Shari’ee law of succession. This is obviously in a case where a voluntary provident fund is fully Shariah compliant. (We are not aware of any voluntary provident fund that is Shariah compliant.)

In the case of a provident fund not being fully Shariah compliant, the total amount contributed in the form of monthly premiums will form part of the deceased’s estate. The remainder of the funds (over and above one’s contributions) will have to be disposed of in charity (to poor Muslims that are eligible for Zakaat or poor non-Muslims) without any intention of reward.

ALLAH TA’ALA KNOWS BEST!

ANSWERED BY:

Mufti Mohammed Desai

Date:- 25 Rabi-ul-Aakhir 1434 / 30 November 2021