Question:
Is the Teachers’ Pension CARE scheme permissible?
In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
The Answer:
It is permissible to be a member of the CARE scheme offered to school teachers.
The Fiqh (jurisprudence of the answer):
Pensions pay-outs are deferred salary[1]. In a CARE scheme, the employee does not gain possession (Qabḍ) of the pension contributions during the contributory phase, instead, the pension contributions are deducted at source and invested by the employer. The employer deducts a percentage without paying that percentage to the employee. As a result, the employee holds a right and claim on the employer. This right is a claim to the deferred salary owed to him for which the employer invests to pay the employee post-retirement. The employee holds a claim because of the services he offered as an employee. He is owed an accumulation of a percentage of his salary which was deducted at source and deferred for post-retirement. It is this legal premise which distinguishes a pension scheme from an insurance contract in which you are entitled to a payment not due to your services but due to your premium. The investments into a CARE scheme are not the employee’s because he does not have any involvement in the investment and nor does he bear any performance risk. Instead, it is the employer who bears the risk. The employee has a right to receive a pension but not the accumulated assets in the pension. Even though the employee is guaranteed a sum because of the CARE scheme, the guarantee is there in lieu of his services he has already offered and not in lieu of his purchasing an annuity. His services are due compensation. Despite the exact sum of this deferred salary being unknown, such obliviousness and ignorance does not lead to any dispute. Therefore, such ignorance will be deemed as jahālah yasīrah (minor ignorance) and is overlooked.
And Allah Ta’ālā Alone Knows Best
Mufti Faraz Adam
www.darulfiqh.com
DISCLAIMER:
The views and opinions expressed in this answer belong only to the author and do not in any way represent or reflect the views of any institutions to which he may be affiliated.
Arguments and ideas propounded in this answer are based on the juristic interpretations and reasoning of the author. Given that contemporary issues and interpretations of contemporary issues are subjective in nature, another Mufti may reach different conclusions to the one expressed by the author. Whilst every effort has been taken to ensure total accuracy and soundness from a Shari’ah perspective, the author is open to any correction or juristic guidance. On the event of any juristic shortcomings, the author will retract any or all of the conclusions expressed within this answer.
The Shari’ah ruling given herein is based specifically on the scenario in question. The author bears no responsibility towards any party that acts or does not act on this answer and is exempted from any and all forms of loss or damage. This answer may not be used as evidence in any court of law without prior written consent from the author. Consideration is only given and is restricted to the specific links provided, the author does not endorse nor approve of any other content the website may contain.