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Fatwa CenterQuestionable retirement pension scheme
Question
There is a group in India working for investment opportunities on Islamic principles. They recently tied up their efforts with Tata Group, a renowned business firm working on mutual fund. They introduce a retirement pension scheme for Muslim community. The scheme work as detailed below: 1. Every month you have deposit Rs.1000/- for a term say 10 or 15, 20 years. 2. During the tenure of your term this fund will be invested in stock markets considering the islamic factor like investing in riba (interest free shares) like no gambling company, no financial banks, no dairy products, no sugar companies etc. 3. This company expect atleast profit of 6% to 10% in a range which cannot be fixed over o period of term. It can be less than 6% or more than 10%. 4. After the completion of term you are given option to withdraw from the schem with whatever profit available or start your pension. 5. When you opt for pension scheme then the whole fund of yours alongwith profit is invested in Real estate with expectation of rentals on the fund. 6. Your pension will be rentals receivable on the property investment again that is not fixed. 7. After pension scheme option you cannot withdraw. 8. If you die, then pension will be continued to your wife, after her death and vice versa, the fund will be distributed to your legal heir. 9. The salient features of the scheme is that a) It does not cover your life b) returns are not fixed c) pension is also not fixed d) investment has to be made by a matured person like over the age of 18 years e) Minimum age to start the pension is 45 years. Please study the same and give your consent on the issue.
Answer
All perfect praise be to Allaah, The Lord of the Worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad 
is His slave and Messenger.
It is probable that this project is a Mudhaarabah (an Islamic transaction in which a person gives an amount of money to another person in order to trade with it and the second takes a share in the profit, like one-fourth, or half, or a third and the like) in a way that this company is like the worker who actually runs Mudhaarabah, and the money that the participant pays is like the capital money of Mudhaarabah between him and the people who are running the project. The people who are running the project constitute the worker of Mudhaarabah here and his profession is to invest the money of the fund so that its profit will be divided among the members. For this transaction to be valid, there are three conditions that should be met:
1- The money of Mudhaarabah should be invested in permissible projects. Therefore, if this money is invested by putting it in institutions and banks that deal with Riba (interest and/or usury), then it is not permissible to join this fund.
2- The capital money of a member should not be guaranteed for him; rather, it should be subjected to profit and loss, as in the case of a correct Mudhaarabah.
3- The profit of a member should be known and agreed in advance, and it should be defined by a known percentage from the profit but not from the capital money.
If the matter which you mentioned is a Mudhaarabah, then we have two concerns with the details that you mentioned:
1- It is not permissible to withdraw from the retirement pension scheme once a subscriber joins it. In principle, Mudhaarabah is one of the permissible contracts and it is permissible for each of the two parties to invalidate the contract whenever he wishes. Nevertheless, it is possible to agree on the period of Mudhaarabah according to some scholars 
.
2- If the contributor dies, then his wife will get the retirement pension scheme, and vice-versa (in case the wife dies while she is the contributes) and if she (he) dies, then the money will be divided on the legal heirs of the participant. In principle, the retirement pension scheme is a Mudhaarabah, so it is the right of all the legal heirs.
To conclude, we advise the people who are running such projects to first fear Allaah, and then appoint some scholars from their country to control whether or not the financial transactions are in conformity with Sharee’ah, because the unlawful transactions are widespread and many, and some of them are not known to many people.
We ask Allaah to make those who run such projects successful. For more benefit, please refer to Fataawa 90770 and 82105.
Allaah Knows best.
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