Zakat and Pensions

Navigating the rules and guidelines on paying Zakat (zakaat, zakah) can be tricky. Fortunately, Islamic Relief is a one-stop for all things Zakat, including whether you have to pay Zakat on pensions.

Simply, Zakat is only payable on certain types of pensions that fall into the following categories:

Defined contribution schemes. This includes:
- Personal Pension Plans or Group Personal Pension
- Additional Voluntary Contribution (AVC)
- Self-Invested Personal Pension (SIPPs)
- Stakeholder Pensions/ Group Stakeholder Pensions

These are Zakat-able during employment whilst contributing.

Muslims do not have to pay Zakat on pensions that fall into the following categories:

Defined benefit schemes. This includes final salary and CARE schemes.
State pensions.

These are non-Zakat-able whilst employed despite any pension deductions from your salary.

It’s really important to check with your pension provider which category you fit into if you’re not yet aware, and then factor your pension assets into your total personal wealth and holdings so that you can make an accurate assessment when calculating your Zakat.

When do I have to pay the Zakat on my pension?

For those who are eligible to pay Zakat on their pension, the following applies:

As some pension funds are only released when you retire, it may not be possible to distribute it alongside your Zakat calculation for each year that you pay/are eligible. Therefore, it is permissible to wait until you acquire your pension funds, however far in advance that may be.Then, simply deduct the Zakatable amount from the total. However, it is imperative that you carefully and strictly log the Zakatable amount on your pension each year that you have been eligible for so that by the time you are able to deduct, you are doing so accurately.

Donate your Zakat now or click here to use our Zakat calculator. You can also visit our Zakat page or watch this YouTube video series for answers on frequently asked questions around Zakat.

Scholar Verification

Our Zakat fund is shari’ah compliant. As with everything we do, we strive to be both purposeful and true. We are working closely with qualified scholars to make sure that our Zakat policy is in strict accordance with what Allah has ruled.

Independant Advisory Board

An independent Zakat Advisory Board, made up of a group of respected scholars, have ratified our Zakat policy and will provide oversight and verification of the distribution of Zakat by Islamic Relief. They ensure clear guidance is in place on how Zakat should be fundraised, allocated, distributed, and monitored. Our Zakat Advisory Board is made up of the following renowned scholars:

Sheikh Abdullah al-Judai

Sheikh Mohammad Akram Nadwi

Mufti Abdul Qadir Barkatulla

Zakat and Pensions