Child Trust Fund using Halifax FTSE 100

Everyday Islamic Finance Personal and Family Finance
#1

Assalamu alaikum,

I am a 17 year old from the UK, almost turning 18 in two months insha’Allah.

I have a question regarding my Child Trust Fund, which is a savings/investment account set up by the Government. My parents were given £1000 to put into the account.

The account says that I am invested in the Halifax FTSE 100 tracker, so this means it is using stocks/shares. I have no idea which companies have been invested in, whether they are doing Halal or Haram business. In the account there is now £1700, so that additional £700 is from the stocks.

My question is, what is the Islamic ruling on this and how do I utilise the money? As far as I’m aware, this is not Shari’ah compliant, I know Shari’ah compliant Child Trust Funds do exist but my parents left my account alone and didn’t do anything with it or transfer it over to one.

Would a solution be that, when I access the money, to donate and get rid of all the money that was from the stocks – the £700 – because its permissibility is dubious, and keep the £1000 that was not from stocks, and which was deposited directly by my parents?

I would appreciate any guidance, I want to make sure I am not doing anything impermissible.

Jazakallah khayr.

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#2

Wasalam

May Allah bless you and increase your knowledge.

  1. You can keep the capital invested i.e. £1000
  2. If you can figure out and estimate how much profit was made from haram stocks, then give this amount to charity, and keep the rest. Otherwise if you not sure, then give all money made to charity i.e. the £700

And Allah knows best!

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#3

Jazakallah khayr Mufti for the answer.

I have realised that I misunderstood how the Trust Fund worked, and I clarified with people familiar with UK finance.

There are different types of Child Trust Fund accounts, and my father decided to choose a stakeholder one (rather than a savings account where money is deposited and left to accrue interest while family and friends can add more money).

When the money from the government was given, this was used to buy shares. For example, in 2009, I had 1863 shares — the government had given £500 and this was used by my father to purchase these shares.

In 2010, the government had given £500 again, and this money was used by my father to purchase more shares — I had 3422 shares.

Because no more money has been deposited into my account either by the government or by my parents, I still have 3422 shares, but the price of those shares has increased. In 2010, I had £1200, and in 2020 I now have £1700, but the amount of money fluctuates a lot throughout the year; in April, it was £1400.

Please forgive me for accidentally misleading you by saying that the first £1000 in my account was from the government and the £700 was from the investments. In fact, all of the money - £1700 - is from the investments and the value of the shares.

Units 3,422.188 + Unit Price £0.502 = Fund Value 1,717.94

My account does show a graph breaking down the fund in terms of the different sectors.

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I know that a percentage of the money will need to be donated because it may have been involved in haram business. What figure would you propose? Some of these sectors are more likely to be involved in haram, for example 20% is from financial sector, while telecommunications or healthcare do not seem problematic. I have been advised by one person to donate 25% as a precaution.

Jazakallah in advance!

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#4

No worries.
I will get back to you about in few days inshaAllah.

Kind regards

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#5

Although some of these sectors may be halal, the issue is that some of these companies might not be considered as shariah compliant for other reasons.

Nevertheless, the initial capital which was the money given by the government is halal and can be recovered.
So if you liquidate your shares, you can recover your £1000 to begin with.
If there was any profit made, then you should give a percentage of it towards charity as mentioned above.
I would personally give 50% to be on the save side.

And Allah knows best!

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#6

Jazakallah khayr Mufti for clearing this up!!!