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Fatwa CenterPension plans for employees
Question
I would like some clarification on "Pensions for Retired Workers", Fatwa: 89640. Is pension then a kind of insurance, so that it falls under Gharar transactions which are forbidden for us? Can a retiree accept pension even if his place of work (or employer) does not require him to make contributions pre-retirement?
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. We ask Allaah to exalt his mention as well as that of his family and all his companions.
We have already clarified in Fatwa: 89640 that pension in some cases is permissible but in other cases it is not permissible. Pension is permissible if it is a gift from the government or from a cooperative insurance as in these cases it is purely a free gift for all participants, the purpose of which is to achieve equality and help in goodness. However, if the insurance is for compensation as it is the case in commercial insurance, then it is not permissible to participate in it in principle, as the participant in this case is either subjected to win or lose, and this is the gambling that Allaah has forbidden. But if this insurance is obligatory, then he should only take the exact amount that he contributed and should not take any excess money.
In the first case mentioned above it is permissible for a person who did not voluntarily enrol in it to take this pension as it is considered a gift.
Allaah knows best.
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