Non Sharīʿah Compliant Pension Fund

Question

I have been working for my employer for 15 years and contribution to a Company pension fund was mandatory. Both my employer and I contributed to the pension fund.

However, the fund was not a halaal fund. As of December 2025, my employer has now introduced the option of a shariah compliant pension fund.

1) What is the calculation for determining how much of the funds which were previously accrued under the non – halaal fund can be transferred to the Sharia compliant fund? My employer has indicated that as the pension fund administrator has changed approximately three times during my tenure it may be difficult to determine where the contributions were invested.

2) Will the Mubz team be able to assist me with the calculation / review the calculation from my employer?

Jazakallah

Darul Ifta, Madrasah Urwah bin Az-Zubayr · Accepted Answer

As salām ʿalaikum wa raḥmatullāhī wa barakātuhu

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

The basic ruling regarding pension funds is as follows:

If the employer deducts the pension contribution before disbursing your salary (i.e., it is a compulsory pension fund), then since you never take possession of those funds, and it is as though you never contributed them. Accordingly, the entire pension fund would be deemed permissible and may be treated as a gift.

However, if the employer first pays your salary and you then make contributions to the pension fund (i.e., it is a voluntary pension fund), this would not be permissible unless the pension fund is Sharīʿah compliant.

With regard to the calculation, further information would be required. In particular, details of the respective contributions of each party, as well as any additional information concerning the investment of the funds, would need to be provided

You may email us at ifta@mubz.co.za

And Allāh Taʿālā knows best.

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