Q: What elements of my pension do I need to pay zakāh on?
If my pensions is a “zakātable” asset then what do I need to pay the zakāt on? The entire holding (i.e. fund value) or pay zakāt on the annual contribution? Is zakāt payable on my contribution alone or mine and my employer’s contribution?
الجواب حامدًا و مصليًا و منه الصدق و الصواب
A: The liability of zakāh on a zakātable pension scheme depends on the nature of the underlying investment/s of the pension fund. All the zakātable assets represented in the pension fund are liable to zakāh and will comprise both employer and employee contributions. These assets and their proportionate value will need to be identified before a calculation of the zakāh liability can be made.
For a detailed breakdown, please see the Zakāh on Pensions research paper on the Al Qalam website.