Company Pension Benefit

By Mufti Ebrahim Desai
Posted: 9 Jamad-ul-Awwal 1424, 27 June 2004

Q.) I will be grateful if you can review the following situation and provide Shariah ruling. The situation concerns my late brother's wife and her children. I am acting as guardian of my late brother's family. My late brother's wife has also asked me to get the Shariah ruling regarding the situation.

My brother was working for a very large organisation here in UK (The Company from now onwards.). He passed away 3 years ago while still employed by The Company.

He was a member of company pension scheme. The Company pension is managed by a Trust set-up by the company which invests the amount contributed by the employee and the employer (The Company). The pension scheme trust is set-up in a manner so that if there is any shortfall in the amount available to service the benefit to the employee then the company will top it up from its own finance.

The Trust is specifically set-up by the company to handle the pension benefits of the employee. It does not do any other activity and is non-profit making in commercial sense. The pension scheme is only available to the employees of the Company. The pot for investment is a combined pot for all the employees in the scheme.

Upon his death his dependents (wife and 4 children) have received following amount from the company Pension Trust.

A. A lump sum amount based on the salary he was getting when he passed away. Had he retired normally he or his dependent would not have received the lump sum amount.

B. Certain percentage of his monthly salary is given to his dependent every month. (There is a clause that if the wife re-marries she will stop receiving her share. When the children are older (16 -17) years they will stop receiving their share.

Is it halal to accept such payment (lump sum and the regular monthly sum) from the company pension scheme?

A.) The amount received through pension will be divided into two parts - monthly deductions and company's contributions.

The monthly deductions from the salary, irrespective of the deduction being voluntary or compulsory, it will form part of the estate and must be distributed according to the Shariah laws of Inheritance. The remaining amount - employer's contribution will be regarded as a gift to whoever are the named beneficiaries of the fund.

We hope this answers your concerns.

And Allah Ta'ala Knows Best