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Fatwa CenterPaying zakah on funds contributed to retirement pension plan
Question
1) Our company is providing its employees with a retirement pension plan scheme. This is a optional benefit, i.e. if an employee wants to join, then he can opt for it. An employee can contribute monthly from 3% to maximum 20% of his basic salary in the plan, and the company will match the employees share from its side, but up to a maximum of 6%. The employee and employer's contribution is invested by the plan managers based in the Isles of Man in a Sharia-compliant investment scheme. If any employee leaves the organization voluntarily within four years of joining the plan, then he will get only his share as per the market value of his invested funds at the time of leaving. If any employees leave/retire after four years of joining the plan, then he gets the complete package, i.e. the employee and employer's contribution as per the market value of his invested funds. Employees cannot withdraw any amount from the funds until they leave the organization; however, they can reduce/increase/stop their monthly contribution once every year, in the month of April. I have completed four years in the plan and, therefore, if I leave my company, then I will receive both my and the company's share as per the market value at the time of leaving. We have access to view and also to choose/switch the investment portfolio directly with the fund managers. Kindly advice if I am liable to pay zakah on this, and if yes, then on what amount, i.e. the total contribution, or only my share, or the market value of the funds?
Answer
All perfect praise be to Allah, The Lord of the worlds. I testify that there is none worthy of worship except Allah and that Muhammad 
is His slave and Messenger.
As long as the money that you contribute to the pension plan of the company is invested in what is permissible (in islamically-acceptable activities), then there is nothing wrong with it.
The employee deserves whatever he had contributed as well as its profits when the contract is terminated. As regards the share contributed by the company, he does not deserve it unless the condition is met, and this is a type of gift contingent upon a condition. According to the view that it is permissible to make a gift contingent upon a condition – which is the view chosen by Shaykh Ibn Taymiyyah 
– then there is nothing wrong with it.
As for your question on how to pay zakah on your invested funds, whether your share or the share granted to you by the company, given that you take possession of it after the conditional period of time has passed, then this is considered an investment deposit, and you have to pay zakah on it as well as on the profit resulting thereof. The amount of zakah is 2.5%.
As for the time before possessing the share of the company, you are only required to pay zakah on the share that you contributed and on its profits. If it is difficult to know the amount, then you should estimate it to the point that you think that you are acquitted from your liability, and you pay the zakah on the previous years, because one is not exempted from zakah by the passing of years. You have to endeavor to estimate the sum for each year and then pay its zakah. Allah says (what means): {Allah does not charge a soul except [with that within] its capacity.} [Quran 2:286]
Allah knows best.
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