Apr 18, 2013

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The concept of a compulsory provident fund scheme

The concept of a compulsory provident fund scheme

Question:

I work for a company which operates a compulsory provident fund scheme. My company deducts 4% from my monthly salary and adds equal amount to it from its funds and then the total 8% is invested into different pension schemes. At the end of the year the company adds 12% (fixed rate) of the total amount accumulated in my provident fund from the start of my service. The same process is repeated every year, till the retirement.

My understanding: The 12% added at the end of the year is company’s strategy to accommodate decreasing value of currency. For employees it is a gift/bonus from company side, employees are not responsible how company earns it, thus making it Halal for them?

Answer:

In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.

In principle, one may participate in a provident fund if one is compelled by company regulations and policies to participate in such a fund. Moreover, the ROI (Return on investment) and all other benefits accrued from the provident fund will be permissible and considered as a voluntary offering from the side of the company. Therefore, the annual 12% and all other benefits given by the company are permissible and Halaal.

And Allah Ta’āla Knows Best                                       

Moulana Ismail Desai,
Darul Iftaa Croydon
Durban, South Africa

Checked and Approved by,
Mufti Ebrahim Desai.

www.efiqh.com

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