IBB accredits new shariah-compliant pension scheme
Dubai, July 1, 2014
Islamic Bank of Britain (IBB) has accredited the ‘Islamic Pension Trust,’ a new fully shariah-compliant auto-enrolment pension scheme.
The scheme was developed by Carey Pensions UK, with guidance from IBB’s specialist shariah compliance department on how it should be structured.
It has been launched to address the need for a shariah compliant pension scheme to meet the criteria for automatic enrolment, as defined by the Government.
The employers in the UK can meet their legal obligation to automatically enrol eligible Muslim employees into a qualifying workplace pension scheme, without compromising their religious beliefs.
The demand for a shariah-compliant company pension scheme in the UK has grown in the past 18 months, driven by the ongoing implementation of auto-enrolment and the demographics of the Muslim community.
The eligible employees, who include those not in a company pension scheme, earning more than £10,0000 ($17,051) a year and aged over 22 but under State Pension Age, represent a large proportion of the Muslim population.
IBB’s analysis suggests that 72 per cent of adult Muslims are aged 18 to 45, compared to 51.5 per cent for the whole of the UK, and 59.1 per cent of British Muslims are in full time employment, compared to 50.3 per cent of the overall UK adult population.
The automatic enrolment legislation in 2012 had presented a dilemma for employers with Muslim workers. In the absence of a fully shariah-compliant scheme to use for auto-enrolment, complying with the law required enrolling employees in a conventional pension scheme.
As Islamic law prohibits the payment and receipt of interest and promotes profit sharing, Muslims are prevented from investing in some equities and therefore the pension funds that contain them. While shares and dividends are acceptable under Islamic law, speculation is not.
The Islamic Pension Trust has resolved this issue, with its investments accredited as shariah compliant by IBB. No income or investment growth is obtained through the payment of interest or unethical business activities prohibited in Islam, such as pornography, gambling, speculation and tobacco.
As with IBB’s own products and services, ongoing compliance of the Islamic Pension Trust is guaranteed through continued audit by IBB’s Sharia Compliance Officer and an independent panel of respected Sharia Scholars, the Sharia Supervisory Committee (SSC).
The Islamic Pension Trust is provided by Carey Pensions UK, a long-established, specialist pensions administration and trustee company, which offers a range of pensions products. The Islamic Pensions Trust operates on a master trust basis.
Sultan Choudhury, CEO and director, IBB, said: "IBB is very proud to be involved in the accreditation of the Islamic Pension Trust, a scheme tailored to the specific requirements of Muslim employees. We can all appreciate the importance of sensible financial planning for our future, but until now it has not been possible for employers in the UK to enrol their Muslim employees into a workplace pension scheme without compromising their beliefs.
“The launch of the Islamic Pension Trust has changed that, as it enables British Muslim employers and charities to provide a fully Sharia compliant workplace pension that meets all of the government’s criteria for an auto-enrolment scheme.”
The scheme will provide investors with access to a series of investment portfolios that are held in a shariah compliant investment service called the Discretionary Portfolio Service (DPS).
The DPS is provided by Smart fund Administration, and accredited as shariah compliant by IBB. The portfolios available have been designed to meet the varying needs of the investor, and take into account their risk profile, how long they wish to invest for and other individual circumstances.
The DPS also incorporates a de-risking programme which commences prior to retirement and is designed to safeguard against investment risk.
The investment portfolios in the DPS can also be held within general investment accounts, an Individual Savings Account (ISA) or a Self Invested Personal Pension (SIPP). The portfolios are invested in a range of assets including cash, property, shariah compliant bonds known as sukuks, equities and commodities. - TradeArabia News Service