Zakat and Career Question: Pensions & Telecommunications

Salaam,

I have recently learnt about Zakat on Pensions and i am confused.

1.) If i am saving in a work place pension in a sharia compliant fund and i can’t access it till 55 at the earliest; do i have to pay Zakat? Do i pay it on the total amount each year even though i don’t have access to it. So i factor the value of pensions with everything else ?

2.) Say if my pension pot now is worth 50k and i buy a house and my savings are minimal. What is the ruling here where i have small savings and a big pension pot . Do i still pay Zakat here. What if my small savings means i can’t pay zakat that is due on the amount or if i do i have next to nothing left at the time - affects my rent etc if i pay?

3.) Side question if i work for (SKY, BT Virgin) as a test engineer for there TV platforms. Testing services and application to help programming etc such as getting channels on the platform is this a halal job. Main job is testing software and platforms so other teams can use and sometimes customers also see new channels and programmes on there box.

Wasalam

May Allah bless you.

  1. My opinion in the past was that, zakat is payable on the value of a defined contribution scheme. This is also the opinion of @Mufti_Faraz_Adam.

However, given the lack of understanding of most people around the calculation of zakat on pensions, I have now taken a different approach as follow:

  • if a pension is zakatable, but one cannot calculate it or cannot get easily access for help in calculating, then the zakat will be payable only for one year after being in possession of the pension fund. This is based on a principle established by the Maliki school of jurisprudence.

  • if a pension is zakatable, but one can calculate the zakat or can get someone to assist them in calculating, then they should pay zakat every year.

@Mufti_Faraz_Adam has a difference opinion to myself on this issue.

  1. If you were to pay zakat, but could not afford to pay in one go, then you would try to pay it in instalments, or as soon as you have the mean to pay.

  2. TV can be used for halal or haram purposes. Hence, testing software for Sky or others is not impermissible.

And Allah knows best!

jazak allah khair . Apologies for the multiple questions now .

on point 1 - how would one know or calculate if a pension is zakatable . Do we use the figure of 40% / 1% of the value of the pot and pay this yearly always .

2.) in regards to saving in a non sharia complaint fund for a workplace pension i have now opted out of. Do i have to pay zakat on the previous years of zakat for this ? or shall i pay 1% on the current value now for this year only.

i don’t know too much about zakat on pensions but can you define the process for me ?

Scenario :
i am now saving into a workplace pension with employer contributions in a sharia compliant fund.
3.) just pay 1% of this value each year ? (40%)

4.) if i have money in shares it get’s difficult calculating this method of zakatable assets etc.

  • i have company shares saving x amount each year for 3 years - i take it i just add the value of x to my overall wealth ?
    5.) if i have shares in Ftse100 company - do i give zakat on the value the shares are worth at the time of zakat or the amount i invested if i have not sold at market value ?
    6.) if i have x amount in Wahed do i also just add the whole amount as part of my wealth and pay 2.% % zakat on all of these ?

In sha allah hope this makes sense. IFG has made me realise a lot about my finances. So it’s good to ask people of knowledge about this too ! There does not seem to be many people versed in this field

Assalaamu alaykum,

At National Zakat Foundation, we reviewed pensions thoroughly with industry experts and looked at the top 100 pension funds for defined contribution schemes. Thereafter, we established the following proxies to ease calculation:

15% direct property fund

26% Shariah compliant fund

27% equity fund

50% mixed assets fund

100% bonds fund

Therefore, there should be very little excuse of “lack of knowledge” on calculation. The scholars mention that lack of knowledge is not an excuse for not fulfilling an obligatory action.

Further, I do differ with Mufti Billal’s view. There can be a moral hazard and potential of people being lazy and simply opting to not calculate based on not being able to calculate. There are several organisations and Muftis which assist in pension Zakat, it is within reach and access to get assistance.

Investments require some basic knowledge, which people should acquire if they are doing this. This is a Shariah requirement for a person before getting involved with pensions.

Therefore, to make easy, you should adopt the proxies depending on the type of pension.

Allah knows best

Jazak allah khair for the response.

I agree. Could you give me the name of these organisations and mufti’s contact details so i can speak with them directly ? I don’t know of any . I would like to speak to them about pensions and shares.

but based on you calculations if i save into a shariah compliant fund i work out 26% of the value of my pension pot and calculate 2.5% of this 26% value ?

In sha allah if you could give me the details of organisations and other Mufti’s i would prefer to speak with them directly to get more educated. NZF - I can’t get a contact number for them.

Sure, you may consider contacting the following Muftis who are all of the view Zakat is payable annually:

Mufti Mohammad Zubair Butt
Mufti Muhammad ibn Adam
Mufti Liaqaut Zaman
Mufti Yusuf ibn Shabbir
Mufti Hanif Patel

You can Google them and find their websites and contact details.

On your second question, yes, you would pay 2.5% on 26%. We believe that will cover your Zakat liability. I plan to review these percentages every five years Insha’Allah to ensure accuracy, but given the nature of the funds, I don’t expect major shift.

Allah knows best

It has been a struggle getting answers from these Mufti - i have managed to get most of them from other places. .

As i have had the pension for 2 years in a non sharia complaint fund. The funds are listed below

The two funds i my company have invested is
1.) Aegon BlackRock 30/70 Currency Hedged Global Equity Index
2.) Schroders Diversified Growth Fund (LSC)

if i have £2,000 in each of these funds how much zakat do i pay on these ? i will be moving the fund to a sharia complaint one next month and will then start using the 26% value.

Please can you clarify and help ? I am now trying to work the backpay for 2 years.

then the zakat will be payable only for one year after being in possession of the pension fund.

Could you please clarify a little more on what this means, or how it is applied in practice? Just want to make sure I don’t misunderstanding the wording, jazakallahukhair