Zakat on Pensions
Question
Is Zakat necessary on pensions?
بسم الله الرحمن الرحیم
Answer
Zakat is not necessary on a defined benefit (DB) pension scheme, also known as a final salary scheme, which is based on salary and length of service.
However, in relation to defined contribution schemes, scholars have mixed views. The cautious view is that Zakat is given. This should be calculated according to the ratio of Zakatable assets in the fund. For example, if one’s pension is valued at £10,000 and the Zakatable assets in the fund is 30% then, the Zakat will be 2.5% of £3,000 which is £75. Although the giving of this Zakat can be delayed until one accesses the fund, it is advised to give it annually to avoid a large amount accumulating.
Allah knows best
Yusuf Shabbir
22 Ramadan 1446 / 22 March 2025
Approved by: Mufti Shabbir Ahmed and Mufti Muhammad Tahir
