Involuntary pension fund with additional benefits

Question:-

I have a question with regards to pension funds and Zakaat which will be applicable on them. There are two fund options that I can opt for. It is obligatory to take out any one of the funds. In both cases, a percentage of the salary is deducted from the employee, and the company also pays a certain percentage. Similarly, in both cases, we do not have access to the fund until after retirement (age 67).

1. From employees wages – 2%
From company – 10%
2. From employees wages – 4.5%
From company – 25%

If I opt to pay the higher amount, (in order to receive a higher amount from the company), what will be the Zakaat payable on a yearly basis.

I understand that in the scenario of a necessary pension fund, Zakaat will only be payable upon receipt of the pension (after retirement). In this scenario, if I opt to give a higher amount, will zakaat be payable throughout the years, even before retirement?

Answer:-

All forms of insurance are Haraam, hence one should not subscribe to any form of insurance voluntarily, be it a pension fund, medical insurance, etc. However, in the case of involuntary insurance (such as a mandatory pension fund), the employee is left with no option but to subscribe to the fund, and further the contributions are deducted directly from the employee’s salary. This leaves the employee with absolutely no choice in the matter. In such an instance, the employee can fulfil this requirement of the company by opting for the minimum insurance package where 2% is deducted from the employee’s salary and 10% is contributed by the employer. There is no need to opt for a higher package when the need can be fulfilled with a minimal package. In conclusion, it is not a matter of paying Zakaat on the policy, instead, it is a matter of impermissibility of insurance.

ALLAH TA’ALA KNOWS BEST!

ANSWERED BY:

Mufti Mohammed Desai

Date: 07 Ramadaan 1444 / 30 March 2023