Civil Service Pensions

Everyday Islamic Finance
#1

Asalamualaikum Warehmatullah.

I was just wondering if anyone knows whether CS Pensions (https://www.civilservicepensionscheme.org.uk/members/) are shariah compliant, or if there is a specific route for selection for it to be considered compliant? I have been in the CS for 18 years and opted out from day 1 and am now considering if there is a route for this in the current system?

JazakAllah Khair

Osman

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#2

Ok, so having done a bit of research. The below will be useful for anyone looking into this in the future iA

  1. IFG: https://www.islamicfinanceguru.com/articles/investment/is-my-pension-halal-a-really-really-simple-guide-ifg

  2. The pension is managed by Legal and General. The default pot they use is not shariah compliant (though I’m not qualified to say that and this is a best guess)

  3. Legal and General have a helpful document library: https://www.legalandgeneral.com/workplace/c/csp-concord/helpful-resources/document-library-page/

Continued…

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#3

  1. Which points to the following guide to investing: https://www20.landg.com/DocumentLibraryWeb/Document?lgrouter=CommApp&targetApp=MANAGEYOURSCHEME_DOCUMENTLIBRARY_ENTRY&reference=cabinet_office_concord_soleselect_investment_guide.pdf

  2. You’ll notice that one of the fund option (page 14) is ‘L&G PMC HSBC Islamic
    Global Equity Index Fund 3’ and the fact sheet is here: https://fundcentres.lgim.com/srp/documents-id/78281500-21b2-48e1-8d69-fdfbaef6834a/Factsheet.pdf

  3. You need to arrange for your default pension investment to be changed to [5.]

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#4

Assalamu alaikum Osman,

Thank you for compiling a thorough review. A while back I too had looked into this, were even had a Muslim speaker come in and talk about this issue and had learnt that the Alpha scheme is a defined benefit scheme, therefore was halal. The money is not invested, rather those paying into the scheme are paying towards those taking out of the scheme. You get a certain multiple of your salary as a pension according to your years service. I do know that there are a few different Civil Service pensions, which one is the one you mention above?

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#5

Managed to find an explanation of the different Civil Service pensions schemes here:

This indicates that it’s the “Partnership” schemes that are involved in investing.

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#6

Jazakumullahu khaira for this info, I switched from Alpha to Partnership in my last civil service job thinking that only the Partnership scheme is halal (HSBC Islamic fund as mentioned above).

Due to this thread I’ve just realised that the Alpha is halal (defined benefit scheme) and is also non taxable which is a big saving over 25 years.

There is a contributions difference as well, for the Alpha scheme, for band 2 the Civil Service contributes 27.1% and for the Partnership scheme it is only 14% max (assuming you contribute at least 3% otherwise it’s 11%). For me that is approximately £3,500 and £6,700 difference accordingly. Over 20 years that is a difference in the end pension pot of £74, 000! So Jazakumullah!

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