Question:

The standard form of a pension (401(k)/Defined Contribution) is for an individual to save regular amounts of money (as little or as much as they like) in a pot that is invested in some vehicle, which may or may not be halal, as your previous answers have described. When the individual retires, he or she takes whatever the pot of money has grown into and converts it into a stream of income: if it is a lot, they get a lot, if a little, they get only a little.

With a defined benefit pension, the arrangement is slightly different: an institution (usually an employer) specifies the amount of contribution everyone in the pension scheme must contribute (eg 3.5% of salary). In exchange, they make a promise of how much they will pay the individual in retirement (eg 1/60th of your final salary for every year that you contribute to the scheme). In practice, the company makes assessments of their total expected liability (ie for all their scheme members in aggregate) rather than attributing funds to individuals, because things like annual pay rises make a dramatic change to the individual liability. As such, it is not realistic (even for a qualified actuary) to assess an individual's fund value at any one point in time.

Notwithstanding my previous question about the permissibility of annuities and the uncertainty therein (ie I know what I'm paying into the scheme, but what I get out will depend on how long I live after retirement) is such a pension scheme permissible? How would one calculate zakat on it?

Answer:

Again their is no Zakah upon this amount until you recieve it in hand. Fataawa Uthmani vol.2 p.51.

Mufti Mohammed Sajjad

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The answer to this question is the opinion of the scholar and does not reflect the opinion of other scholars of As-Suffa Institute and As-Suffa Institute as an organisation.