Abdur Rahman ibn Yusuf Mangera – Simplified Zakat Guidance Zakat on Defined Benefit or Contribution Schemes, and State Pensions

Firstly I want to speak about a lot of people are asking

especially when it's Ramadan they asking about zakat.

Now in terms of zakat, one of the issues that a lot of people ask

about is zakat on pensions.

There's people have pensions from their work. So they asked about

Zakat and pensions. And the reason why there's a confusion about

whether you should pay for zakat and pensions or not, is because

your pension money is locked up until you're 5960 62, whatever the

age is, so you can't take it. Until then.

You could in many cases, but they discourage you. So they charge you

a huge penalty. So then there's no point taking it. So what we have

to understand is a pension. To understand this muscle, what you

have to understand is that what is a pension, a pension is not some

kind of magic case or collection of money. It is money that has it

is a collection of money, right? A sum of money that has been put in

a type of investment. A pension is just an investment. It could be

multiple types of investments, you have to check your own pension as

to what the investment is in. Is it in government bonds? Is it in

stocks and shares? Is it in real estate? Is it just in a high yield

account? What is it some things of these are haram, other things are

halal. So number one, you have to check whether your in your pension

is in a halal investment or a haram investment that will depend

on the type of investment. Okay, that's clear. So far, pensions are

not all one. They're based on investments and investments are

halal or haram. Now, even if it's a haram investment, you want to

switch it to a halal investment. Usually, if your company is

providing you have the option your company pension will not be

administrated by them. Usually they have a third party separate

pension company, organization that will administer your employer's

pensions, they give you access, you can log in, you can check,

don't leave the money where they've put it, you need to make

sure that out of the different options they have you choose the

halal option, and you say put my money into that option.

If you haven't, then the money that has been taken from you to

put in and whatever money your company put in, because what

happens sometimes is your company will say you put in money from

your salary, and we're going to double that money. So that's extra

money, they're gonna give you beyond your salary, that money is

halal for you. That's not haram. Right? That money should be halal.

However, if it's haram investment, then any proceeds and profits on

that would be haram. So you don't take those, you can take your

capital. And that's how much you have to be suckered on as well.

Right? So you only pay zakat on the halal element of it, the rest

has to be given in the path of a given back, but you can't give it

back then you give it to the port with no intention of reward. So if

you manage to get it into a halal investment, then your pension will

be halal. And all the money in there, whatever it is got 10%

increase 20% increase, whatever it is, all of that is yours, and all

of it is accountable. The capital of your money was accountable. So

your profit is accountable. If it's Hala is accountable, you

don't have to give it away. It's halal. Now, the fact is that you

can't take it right now. Because you can't pull it out. It's locked

up. Right? So you're not obliged to pay zakat on it straight away.

But you are obliged to pay zakat for each year eventually. So what

you should do is you should every time your zakat time comes, you

should check your investment, your pension, how much is it worth and

note down? The percentage of this occurred, I have other clips that

you can understand how to calculate the cut on stock and

other things, which I'm not going to talk about right now. Because

we'll get confusing, right? Exactly how to calculate the cut.

That's a different issue. But you calculate, use the cut and you

note it down. If you've got money you can pay and if you don't, you

can wait until you get all of the money then you can pay for all the

years. Why should you pay money even though it's locked up? Why

should you pay zakat eventually, it's because it's your money. It's

working for you every year, it's working for you it is invested,

it's hopefully going to increase. So it's your money. Right? Of

course, if you're going to pull this out right now prematurely and

pay 40% 50% fee, then you only pay on what you actually receive.

That's if you're going to do that. But most people do not do that.

They just leave it in there and they benefit from it afterwards.

So that's how you pay these this investment. This pension I'm

speaking about is what you call this investment I'm speaking about

is what you call is the standard normal investment if you're not in

a government job. normal jobs is called a Defined Contribution

Scheme. It's called a defined contribute

Using scheme, you can find out from your investment from your

pension. If you're if you work for TfL, or you work for NHS, or you

work for the schooling, education, government, or government,

government organizations, they have a different type of of

pension. That one they call a defined benefit one. What does

that mean? They'll take your money,

you give a percent you allow them to withhold, what they're doing is

they're withholding a percentage of your salary. And they're going

to promise you that after you retire for the rest of your life,

we're going to give you this amount, how much based on the

number of years you worked.

And something else, some other factors, that's how much then

until you die, we're going to look after you and we're going to give

you what they call a deferred salary. So your salary will

continue after you even leave the job. And when you retire, based on

how much you put in, and how many years you've been with them, and

so on and so forth. How what do they do with that money? We don't

know.

We're not responsible for that. One. We're not responsible to

check whether it's halal or haram. Because we can't do that. They

don't give us access. They just withholding salary. It's like if

you work for me, right? If you work for me, and I don't pay you

this month, you've done the work but I don't have money I don't pay

you. This will also give you an excellent annual Zakat is due this

month. You don't have to pay zakat on this amount. Because any work

you've done until you don't receive the money that's not as

accountable.

That's not as accountable, okay, in even normal situation. So in a

defined benefit scheme, they're withholding your salary a portion

of your salary, and they say we're gonna give it to you later,

according to this, according to this particular formula. So that's

why you don't have to pay zakat on that for any of the years until

you actually receive the money after you retire, then if it

calculates to be accountable at that time, you will pay zakat,

otherwise you don't have to worry about any of the years, those

types of pensions are very difficult to come by now, most

companies don't do them because they're too expensive for them.

Only government organizations provide that kind of a pension,

it's a very good pension, because you keep some of your money, and

they add a lot of money on top for you as well. And then you get the

money, then it doesn't matter what they're investing in, as you said,

we don't even know what they're investing in. So hopefully that's

clear in sha Allah, about defined contribution schemes, which are

most companies and defined benefit schemes, which are usually

government companies. And that's how you pay zakat on them. So on

define contribution you pay every year, and you're responsible for

where it's invested and defined benefit, you just have to wait

until you get your salary. And then at the end after you retire,

your leftover salary, your retirement salary, and then you

pay zakat as an if that is due at that time, not for all of the

years. So inshallah that's clear. So another question regarding

pensions is about the state pension, which is the government

pension that people receive after having worked in the country for

an X number of years? Is there's a cap on that, and what is the

situation for that. So the way that works is that every month and

every year that you work, the government tells your employer to

deduct a certain payment, that certain amount is paid into your

account, which essentially is supposed to accumulate, the

government does what it does. And we don't need to go into what the

government does with that. But essentially, it's something which

is obligatory, it's something which you don't have a choice in,

right. And it's illegal to avoid that, usually. So that's why it's

something that is cut from your pay. And it is something that the

employer contributes to, and that then all accumulates together. And

eventually you get that as a sum, right? You get that as a sum. When

when you when you retire a retirement age, you get the state

pension is there's a curtain that was just like I mentioned the

other day about the defined benefit scheme, right? This is

very similar to that in the sense that because it was cut from your

pay without you without, you know, you knowing where it's going or

whatever, you know, it's going it's going to the to the

government, but it's something which is obligatory. So you have

no control over that. So you can just assume you never receive

that. So it's not yours until you actually receive it. So when you

receive it, it will be when when you receive it at your retirement

age, when you receive it, it will be like new income that's coming

in. So you don't have to worry about any circuit for all of the

years until you get your retirement age. So if you start

working at the age of 25, or 24, or 20, or whatever it is, and then

eventually you get your pension at the age of 60 or 62 or whatever it

is, right? That is not the cuttable for all of those years.

It's just like new money that's coming in. You just have to basic

art on whatever you have on that year on your card date and you you

have from there, that's the way you will do that. So cinematic

Maura delay Ricardo

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