Zakaat on a re-invested pension fund
Question
Q. Your previous email on compulsory pension funds has been helpful. I now have a follow-up question to it. In my case, it was compulsory for me to have a pension fund with my company. However, I transferred from my first company to my second company and I was given an option by my first company to either take possession of the full amount after deducting tax or to transfer my pension fund to a preservation fund. In this scenario, which portion is Zakaatable and which portion forms part of my estate?
Answer
In the enquired situation, as you were given the option to access the entire amount of your compulsory pension fund and chose instead to transfer it to a preservation fund, Zakaat will be applicable on the total encashment value of the current fund, i.e. the maximum amount you can receive in cash from the fund through any means possible including termination of the fund.
In regards to your estate, the entire fund will form part of your estate and will be distributed to your heirs according to the Islamic Law of succession and inheritance.
And Allah Ta’ala Knows Best
- Answered by
- Mufti Ismaeel Bassa
- Checked by
- Mufti Ebrahim Desai
Fatawa SA is an independent, read-only index of fatawa already published by Jamiatul Ulama KZN. It is not a fatwa service. For your own situation, ask the issuing Darul Ifta directly.