Fatwa: # 45105
Category: Charity, Obligatory (Zakaat)
Country: African Country
Date: 9th May 2020


Do I have to pay Zakaat on my pension funds?


As Salaam u Alaikum. Kindly advise on how to calculate zakaat on the following asset classes - my annual zakaat date is 1st Ramadaan:

1.      Preservation Pension Fund

I was part of a mandatory pension fund with my previous 2 employers from 2005 to 2019. When I left my first place of employment in 2013 the pension fund was transferred from 1 fund to another in line with my 2nd employer's requirements.

In May 2019 I left my 2nd employer and joined another company which did not offer any pension fund. In July 2019 my pension fund was transferred to a voluntary pension fund. This is a lump sum long term investment and there is no intention to withdraw from this fund and is not held for speculation - there are no dividends; only capital growth. I do not contribute to this fund on a monthly basis. The fund allocation is as follows:

- 95.68% in a shariah compliant Sanlam Private wealth share portfolio

- 4.32% in Kagiso Islamic balanced fund

The rules of this fund allow as follows as advised by the investment broker:

This is available to you immediately. However, there are statutory deductions such as tax. In your case the tax applicable will be XXX + 36% of the amount above XXX. Although this is technically available to you, you may not immediately withdraw from is as XXX is invested in an Islamic Term deposit and will only mature on 30 August 2020.

2.       Retirement Annuity Fund

I make a voluntary contribution monthly to this fund from July 2019.  The fund allocation is as follows:

- 50.61% in the Old Mutual Albaraka Balanced Fund

- 49.39% in the Kagiso Islamic Balanced fund

The rules of this fund allow as follows as advised by the investment broker:

This is not available to you currently. It only becomes available when you reach retirement age and will have restrictions. You will be entitled to withdraw 1/3 maximum (subject to certain tax-free limits) and the 2/3 must be invested in a living annuity to provide a monthly income. However, during your demise with both options, the funds are paid out to your nominated beneficiaries.

Kindly advise based on the information provided above. Jazakallah.


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

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

Pension funds are of two types; compulsory and voluntary. If a pension fund is compulsory, and you have no choice in the matter, you will not have to pay zakāh on the funds as they have not come into your milkiyyah (ownership) as of yet. If a pension fund is voluntary, then it will not be permissible to participate in the fund if the funds are invested in impermissible conventional financial institutions. One should dispose of the dividends accrued of such funds and pay zakāh on the capital amount. However, if the funds are invested in a permissible Sharīʿah compliant conventional financial institution, one will pay zakāh on his capital amount, and any dividends accrued.

Our Darul Iftaa has not approved the investment institutions mentioned above where your pension funds are being invested. Therefore, we suggest you send your zakāh query to those ʿUlamā' who have approved these investments.

And Allah Ta’āla Knows Best

Abrar Habib

Student - Darul Iftaa

New York City, New York, USA

Checked and Approved by,

Mufti Ebrahim Desai.




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