Are All Types of Assets in a Pension Fund Subject to Zakat?

Not all assets within a pension fund are subject to Zakat. 

Whether Zakat is due depends on the type of pension scheme. Here are the zakatable and non-zakatable pensions:

Non-Zakatable Pensions:
Zakat is not required on defined benefit schemes, such as final salary and CARE (Career Average Revalued Earnings) schemes. These pensions do not have individual investment accounts, making them exempt from Zakat.

Zakatable Pensions:
Defined contribution schemes, however, are Zakatable. The Zakat obligation depends on the proportion of Zakatable assets within the fund. Since these pensions are investment-based, contributors must assess their share of Zakatable assets when calculating Zakat.

How to Calculate Zakat on a Pension Fund:
Ideally, individuals should determine Zakat based on their pension’s investment portfolio. The percentages for common pension funds are as follows:

• Shariah Funds: 26% of assets are Zakatable, requiring 0.65% of the total pension to be paid.
• Direct Property Funds: 15% of assets are Zakatable, so 0.375% of the pension is due.
• Equity Funds: 27% of assets are Zakatable, requiring 0.675% of the pension as Zakat.
• Mixed Asset Funds: With 50% Zakatable assets, 1.25% of the pension should be given.
• Bonds/Gilts: 100% Zakatable, meaning 2.5% of the pension is payable.

To determine your pension fund type, review your statements or consult your employer. Understanding these details ensures accurate Zakat calculations, fulfillment religious obligations appropriately.

And Allah knows best!