Does a Pension Investment Form Part of the Sharia Estate of the Deceased?
The question, as received
Salaam what’s the ruling to pensions after death? The defined contribution pension scheme rules dictate it goes to the wife. Should it nonetheless be distributed islamically, or not counted as part of the deceased estate?[Question published as received]
The answer
An investment through a defined contribution pension plans is part of one’s assets, and as such, will be counted among the deceased’s estate.
In short: a defined contribution pension is part of the estate and is distributed by the Shariah shares.
Fiqh basis
Defined contribution schemes are an investment plan designed to provide individuals with a source of income during their retirement years. The investment typically consists of both the contribution made by the individual from their salary and the contribution made by the employer. In a defined contribution, the plan holder bears the risk of the investment and has a beneficial interest in the investment. This gives him Milkiyya (ownership) to the defined contribution scheme designated for him.
‘Allāmah Ibn ‘Ābidīn (d. 1252 AH) in his Hashiyah states that assets that are exclusively owned by an individual are considered inheritable wealth. In light of the above, pensions under defined contribution schemes are considered to be personal wealth and are calculated as part of the estate upon death. This is primarily due to the fact that the subscriber of the pension solely holds both the risk, and the benefit factors in the investment.
It is important to note that the laws, regulations, and make-up, governing defined contribution schemes may vary between countries. It is always best practice to consult with local scholars and legal advisors to ensure Shar’ī compliance.
And Allah knows best.
Maulana Ammar Y Badat
Reviewed and approved by Mufti Faraz Adam
Based on the Hanafi school and on the question as it was asked. Another mufti may reach a different conclusion. Read the disclaimer.