Is it ok to only pay zakaat once a retirement annuity matures?
Mu' meneen Brothers and Sisters,
As Salaam Aleikum wa Rahmatullahi wa Barakatuh. (May Allah's Peace, Mercy and Blessings be upon all of you)
One of our brothers/sisters has asked this question:
Regarding retirement annuities: I have several retirement annunities which I contribute a monthly premium to. These premiums are then invested in order to provide me with an income upon retirement. UNTIL RETIREMENT, I HAVE NO RIGHTS TO MY FUNDS (except in very limited circumstances). Effectively therefore, I am deriving no real benefit from the annuity until it pays out. Once it pays out, I will pay zakaat on any excess ie, not used for a year. However, while the funds are accruing to the fund, do I still pay zakaat - this may have the effect that I will pay zakaat out of funds generated by my current income, which may not be sufficient to discharge the zakaat burden. Is it ok to only pay zakaat once a retirement annuity matures?
Furthermore, regarding a life poilcy - this will never accrue to me (even though I pay the premiums) because it will pay out to my heirs upon my death. Therefore it is not an access in my estate (or is it?) Will the duty to pay zakaat not be on my heirs with the policy pays out. Otherwise, once again, I may have to pay zakaat out of my income, which may not be suffient to cover such costs.
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Zakat on retirement fund and life Insurance
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Your Question: However, while the funds are accruing to the fund, do I still pay zakaat. Is it ok to only pay zakaat once a retirement annuity matures?
Since you are contributing a monthly premium to your retirement fund from your current earnings it would constitute a savings for you, thus zakah would be liable on all excess savings which are over and above your current needs and have been in your possession for a period of one year.
Your Question: Furthermore, regarding a life poilcy
Dear and beloved brother in Islam, as your brothers and well-wishers in faith it is our duty to inform and warn you that almost all the scholars and jurists in Islam have ruled that it is not lawful and permissible in Islam for a believer to take out a life insurance policy.
You or your heirs have a right only to claim or take back the premiums you have contributed towards your life policy to date; and when claimed and in your possession for a period of one year, zakah would be liable on this excess wealth and savings.
Any increase in the amount to what you have yourself contributed towards the life policy would be unlawful in Shariah Law for you, or your heirs after your death, to consume
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Your brother and well wisher in Islam,