Investment ; permissible ? : permissibility of pension funds benefits

Fatawa Question

[Question One] Assalamu Alaykum Wa Rahmatu Allahi Wa Barakatuh Dear Dr Kahf My employer has a pension plan for his employee as part of the benefit package. The employer contributes yearly to the plan for each employee depending on his salary and then the employee will accumulate benefit in this plan translate into a monthly salary for the rest of his life when he reaches age 65. That salary amount will depend on the employee yearly income and years of service. This plan is done through an insurance company. Is the benefit salary that comes from this plan at age 65 Halal and permissible in Islam ? Can a person simulate this plan on his own (if the above is permissible in Islam), by doing exactly the same as the cooperate pension plan, by paying premium to an insurance company in exchange for a monthly salary for the rest of his life after age 65, and that monthly salary amount will depend on the total amount paid to the insurance company over the years and life expectancy. The amount that I will get back from the insurance company could be less or more than the total amount that I paid to the insurance company as it will depend on the number of years that I will live after age 65 (even though the calculated monthly salary by the insurance company after age 65, takes into account the probability of life expectancy). And if I die before age 65 my beneficiary will only get the exact amount that I paid previously to the insurance company not more or less as a lump sum or installment. Thank you much for your time [Question Two] Dear Dr Kahf : My employer has a retirement benefit plan called 457 b plan, my employer contributes to the plan alone. Now that I am leaving that employer, the employer gives me the option either to get the money in that plan in the form of monthly payment for the rest of my life (similar to pension) or get the balance in a lump sum (then close to 1 / 2 of the money goes into taxes). These options are in their plan documentation for every employee as part of the benefit I prefer to take the first option (monthly payment for the rest of my life) is this halal as it is a part of the benefit from the employer. Thank you much Housam

Fatwa

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Publication Date

2009-04-27

Main Subjects

Financial and Accounting Sciences
Religion
Islamic Studies

Topics

• Islamic jurisprudence
• Contracts
• Pensions
• Investments
• Insurance
• Employers
• Endowments
• Perillous saale
• Insurance companies
• Usury
• Payments
• Premiums
• Merit

No. of Pages

2

Data Type

Fatawa

Language

English

Record ID

BIM-734387

• APA
• MLA
• AMA