Pension fund

Question

I have a question regarding a pension fund payout from my company of employment.

On joining the company it was compulsaroy to contribute to the fund a certain percentage of my salary. The company also contributed on a monthly basis to the funds. Since the inception of the fund the company I have contributed for exampe a R100 000 over the few years I have been employed.

The company has taken a decision to close down the pension fund and move to a new fund, this is done since under the current fund the company has an obligation to meet and shortfalls of the fund and want to get out of this risk.

The current pension fund is being liquadated and thus the funds therein are being distributed to the members. The pay out we receive it about 5 times what we contributed to the fund. To my knowledge the largets source of income for this pension fund was a massive office park which they collected and subsequetnly sold in 2012 at a significant profit.

I understand from other fatwas on this site, that the funds from a pension fund which are compulsary and a condition of employment are halaal. Would the same apply in this case?

Muhammad Haris Siddiqui · Accepted Answer

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

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

The income from the now liquidated pension fund is from a property investment. The pay-out to you as an employee has two parts:

Your contribution from your salary.

Contribution from the company.

The entire pay-out to you is permissible as you are being returned your mandatory salary contribution. The surplus amount is regarded as a gift from your company.[1]

And Allah Ta’āla Knows Best

Muhammad Haris Siddiqui

Student Darul Iftaa
Melbourne, Australia

Checked and Approved by,
Mufti Ebrahim Desai.

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