Do I still have to pay zakah on my badly-performing pension fund?
August 15, 2011
Q: Do I still have to pay zakāh on my badly-performing pension fund?
If someone has a fund, which they have control over where it is invested, but they still can’t liquidate or access any part of it till they are 55, then s/he has to pay zakāh on the value of the fund (not on the value of the contributions he puts in). If the fund isn’t doing very well, this might mean he is paying out 2.5% every year on a fund whose overall value doesn’t rise except based on the contributions he puts in. Does he still have to pay zakāh on my badly-performing pension fund?
الجواب حامدًا و مصليًا و منه الصدق و الصواب
A: The situation is analogous to a business that is not doing so well but whose assets are still subject to zakāh. If your pension fund fulfils the necessary criteria to be zakātable on a yearly basis, then the actual fund itself (not just the contributions) is still subject to zakāh.
 For a more detailed explanation, please read the Zakah on Pensions research paper on www.alqalam.org.uk