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Fatawaa


Subject : Ruling on Delay Penalties Charged on Pension Fund Participants

Fatwa Number : 3606

Date : 25-03-2021

Classified :

Fatwa Type : Search Fatawaa


Question :

In case a member of  the Pension Fund failed to pay outstanding contributions, what is the ruling  of Sharia on imposing doubled delay penalties?



The Answer :

All perfect praise be to Allah the Lord of the Worlds. May His peace and blessings be upon our Prophet Mohammad and upon all his family and companions.

Funds established by various bodies, public or private, is a form of social solidarity, and the contributions that the participants pay to the funds are a donation, but a conditional one, and there is no sin in this from an Islamic perspective. 

The pension system is a form of cooperative insurance, which is deemed permissible by the majority of contemporary scholars. This system is based on cooperation with regards to the tolerance of risks, and doesn`t fall under strictly commutative contracts. Consequently, delay penalties imposed in case a member of the Pension Fund failed to pay the outstanding contributions are excluded from the rule pertaining to usury, because usury materializes in strictly commutative contracts, usurious loans, and debts. As for cooperative insurance, it doesn`t fall under any of these.

In conclusion, the above delay penalties aren`t usury, however, this shouldn`t be exaggerated in case a member failed to pay contributions on time. And Allah the Almighty knows best. 

 

      




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