The UK legal reforms on pension and the opportunity for Islamic pension funds

Faizal Ahmad Manjoo

Journal of Islamic Accounting and Business Research, 2012, vol. 3, issue 1, 39-56

Abstract: Purpose - Recent developments in pension law in the UK has seen a shift towards the creation of aShari'ahfund under the National Employment Savings Trust (NEST) to cater for British Muslims' retirement needs. However, as the concept of funded pension is an alien concept in Islamic history, there is a need to analyse the intricacies associated with the establishment of such occupational pension plan. The purpose of this paper is firs, to address the concept of pension to see how it fits with Muslim ethos, and second, to highlight someFiqhi(Islamic jurisprudence) issues that need to be addressed before establishing theShari'ahpension fund. Design/methodology/approach - The paper first traces the historical development of pension in the UK and how the issue of an ageing population is shaping the reforms. It subsequently highlights some of theFiqhiissues that need to be addressed in establishing the newShari'ahfund and recommendations are then made. Findings - The paper sheds some light on the need to consider the idea of savings in Islam to meet retirement needs because the societal structure of Muslim community in the UK is economically changing as compared to the past. Hence, the concept of pensions is seen to fit into themaqasidofShari'ahwhich includes protection of life, family and wealth. However, there are someharam(non permissible) elements, such as annuities and nominees (which affect the law of inheritance), that need to be eliminated in the legislation and pension models currently available. Hence, a model is suggested to help make theShari'ahfund offered to British Muslims via NEST to be religious compliant. Practical implications - The recommendations made in this paper will facilitate to some extent addressing some of thefiqhiissues to make the fund religiously suitable. Social implications - To align an Islamic occupational pension model with that of its mainstream counterparts requires addressing some of thefiqhiissues to make the fund religiously suitable. Originality/value - A modern Islamic occupational pension fund is a new phenomenon in the Muslim world, and this issue is hardly being addressed so far. This paper highlights some pertinentfiqhiissues to be considered in establishing such an occupational pension fund.

Keywords: Pensions; Ageing population; Pension legal reforms; Pension finds management; United Kingdom; Fiqh; Islamic finance (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jiabrp:17590811211216050

DOI: 10.1108/17590811211216050

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