Market crash and where to move pension

Assalamu alaykum

I’m concerned about current macro conditions and global stock markets crashing which will leave many muslims (like me) highly exposed in their pension funds.

It seems the only sharia compliant fund available in UK workplace pension schemes that most of us are invested in is the HSBC Islamic Global Equity Index - it is 100% stocks so it is highly exposed. So if the S&P 500 crashes - the pin that will pop the bubble isn’t known but I’m certain there’s a bubble - then our pension funds go down. I don’t fancy losing 50% and would rather cash out now whilst it’s nice and high to protect my future investment.

What are my options?

  • I tried looking for other funds that aren’t 100% equities to switch to but can’t find any that are shariah compliant through my provider (Aviva). I’d like to switch to gold ideally but other stocks/shares/ETC/ETFs are not permitted, only funds.

  • Has anyone managed to move to a SIPP and continue getting their employer to contribute? My company adds double whatever I contribute, but I don’t think they would do this if I decide to manage my own pension.

  • Is there a way to sell my units completely in my pension account, then hold funds as cash only until this all blows over? I know it could be a couple of years but that sounds good to me. I couldn’t see any options for holding a pension as cash.

  • Any other options?

It seems we’re being hard done by as Muslims. Very little choice and we’re at the mercy of markets - particularly the US - which have turned into a casino right now. Way, way overpriced and over-leveraged.

Close your eyes, keep investing monthly and in 10 years you will be ok and glad you took this advice. I have been in the markets since 1987, investing my first dollars just months before the crash. Guess what, time took care of it.

If you are diversified into large-cap stocks you should be ok i.e. sp500 or a subset of 1/3 debt/equity which should be less impacted by a correction related to economic downturn.

1 Like

completely agree with @HKirefu.

Unless you are near to starting drawing from your pension/near to retirement - let the market do their thing. They go up and down but the long term trend is for equity is upward.

If you think otherwise or you are near retirement, an option could be to move your money to a Sukuk fund such as Franklin Global Sukuk Fund - W (Qdis) GBP-H1 - LU2407588818. Having spoken to AJ bell previously, they should be able to add this fund on their platform subject to an investment commitment of ~£75k. Give them a call and discuss it. You can then open a SIPP with them and move your current pot. Your current employer can continue to contribute with Aviva and after a while say once a year (as it requires admin work for a lot of parties), you can keep moving your fund to the Sukuk fund.

May Allah bless you

Franklin Global Sukuk Fund - how is this product any different than a regular bond?

The payments/coupon rate is fixed just like a bond (which is asset-backed).

What asset is backing the Sukuk?

The structure appears to be an asset sale and leaseback contract, which is a riba-based financing contract designed to off-balance-sheet debt obligations.

Here is a link to the largest holding in the fund:

Whilst I agree with both of you that over the long term (15+) years it won’t matter significantly, if you look at the SP500 after the 2007 crash it took 5 years to get to pre cash levels. Even robust and resilient stocks like Apple, Walmart and Google took 2-4 years to recover. Many stocks lost 50-90%.
In 2000, some stocks like Cisco and Vodafone never recovered their all time highs.
So losses can be really large and set you back years - even if you’re diversified, all stocks go down in a crash so diversification doesn’t really help unless it’s across different asset classes.

I’ve come to the conclusion being exposed only to stocks is too risky in the current macro environment.

I’ll look at the other options and potentially whether I can hold as cash only for a couple of years.