Providence funds and retirement accounts : interest on retirement savings

Fatawa Question

[Question one] : Assalamu Alaykum I worked in Canada for some time, and my employer deducted 5 % of my salary and matched this deduction, such that when I retire they will give me 2 % for each year I worked, provided that I work for them for at least 10 years. I resigned after 7 years. They gave me the contributions made to the retirement fund, and interest it accrued over the 7 years, but I had to transfer this money to a retirement savings plan. I could not take it as cash. I cannot withdraw this money until I am 59 years old, or there will be a large penalty. What should I do with the amount of money that came from interest ? Your response to this question will be very much appreciated. [Question two] : Jazaka Allahu Khairan for your answer, and I really appreciate your time and dedication to Islam. I would certainly like to take your advice to get rid of this interest money, and I do not have any desire of taking a single penny from Riba. My only problem is that the interest amounts to about $ 20,000, and I do not have this kind of money to pay. Can I keep the money in the retirement savings plan, and then once I can start withdrawing from it I withdraw the interest, and get rid of it ? There are also two related questions : 1. When I withdraw the interest, it will be considered as income, and I have to pay taxes on it. So, can the taxes on this interest be paid from the interest itself ? 2. When I give the interest to charity, can I claim it as donation on my income tax return, and get tax deduction for it ? Wa Jazaka Allahu Khairan. Ahmed

Fatwa

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Publication Date

2012-10-24

Main Subjects

Financial and Accounting Sciences
Islamic Studies

Topics

• Islamic jurisprudence
• Pensions
• Savings
• Usury

No. of Pages

2

Data Type

Fatawa

Language

English

Record ID

BIM-730396

• APA
• MLA
• AMA