Do I Have To Pay Zakat On Money Saved For Retirement?
Aren’t all savings are some future rainy day?
I’m sorry, but there are two different opinions about whether Zakat should be paid on pension. Most Zakat collectors say it should be paid, while many independent scholars disagree. To be eligible for Zakat, you should have unrestricted access to your money or assets. However, accessing pension funds before maturity can have significant consequences. Many people invest in pensions to avoid financial loss. Let me explain my situation. If I contribute £10,000 to my pension each year, my monthly net wages are around £XXX. If I don’t contribute, I get around £XXX per month. So, I have a choice: take £1,800 per year as additional salary or invest £10,000 per year in a pension with restrictions until I’m at least 55 years old. Even after 55, I can only withdraw 25% tax-free each year, and if I withdraw the entire amount, 75% is subject to income tax. It’s not accurate to say I have free access to pension funds. Now, let’s talk about the 2.5% Zakat per year. Faisal Haroon argue that it’s not a lot. Using a hypothetical amount of $100,000, at a 2.5% rate, it would take over 600 years to deplete the whole amount. However, arguing about whether it’s a large or small amount is irrelevant because it’s a religious command to pay it. We believe Zakat doesn’t make one poor; instead, it increases wealth. The calculation suggesting it would take 600 years is misleading. To make a decision, consider seeking fatwas from reputable muftis who aren’t Zakat collectors. Assess their arguments and follow the fatwa that you find most compelling. Keep in mind, I’m not an Islamic scholar, so research and form your own opinion.