Zakaat on the Two-Pot Retirement System in South Africa
Question:
Individuals now have funds available to utilised within the 2 pot system which previously was not allowed. Are these funds that they now have access to, Zakatable?
Answer:
In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
Answer:
In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.
The two-pot retirement system as defined by the National Treasury of the Republic of South Africa refers to “ The two-pot retirement system is a reform that will allow retirement fund members to make partial withdrawals from their retirement funds before retirement, while preserving a portion that can only be accessed at retirement to help improve retirement outcomes.
The reform creates a “savings component”, a “retirement component” and a “vested component”. Only the “savings component” and “retirement component” can receive retirement contributions from the implementation date onwards. The vested component will house retirement benefits accumulated by the member before the implementation date. Investment growth will still be credited to this component. “[1]
According to Shariah Law, Zakat is Wajib on one who has complete ownership (Milk Taam) and complete possession (Qabdh Taam) of the Nisab amount of Zakat. According to our understanding, the two-pot system does not provide unfettered immediate access to the savings component as per the following guideline issued by the National Treasury: “It is unlikely that funds will be able to pay out withdrawal claims immediately when the two-pot retirement system takes effect on 1 September. The new two-pot system will take effect on this date; however, several steps need to be implemented first. The seed capital calculation, which determines the initial amount to be allocated to the savings component will be conducted using values at the end of August. Funds will also need to receive, verify and process withdrawal claims received. Funds also need to amend their rules and have them approved by the Financial Sector Conduct Authority before implementing the new system. In addition, new systems need to be in place to allow for such annual withdrawals both from a fund and SARS perspective.”
Therefore, according to our above understanding, Zakat will not be Wajib on one’s funds within the savings component since one does not have unconditional immediate and complete possession/access (Qabdh Taam) to the savings component of one’s retirement funds.
Furthermore, Zakat will be calculated on the nett cash component of the withdrawn funds within one’s complete ownership (Milk Taam) and immediate possession (Qabdh Taam) based on one’s personal Zakat situation on one’s personal Zakat calculation date.
Moreover, we advise one to consider a shariah compliant savings vehicle to avoid any interest/non-shariah compliant income being accrued in the savings component and the vested/non-vested retirement component.
Mufti Ismail Desai
And Allah Ta’āla Knows Best
Shariah Board and Fatwa Committee,
Darul Iftaa, Durban, South Africa
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 organizations to which he may be affiliated with. The opinions and educational information proffered in this communication are based on the jurisprudential understanding and available knowledge of the author. Given that contemporary issues and interpretations of contemporary issues are subjective in nature, another scholar may reach different juristic inferences and conclusions to those as expressed by the author. Whilst every effort has been taken to ensure total academic integrity and honesty, the author is open to corrective measures based on sound academics and juristic inferences. The Shari’ah ruling given herein is based specifically on the specific 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. Any or all links provided in our emails, answers and articles are restricted to the specific material being cited. Such referencing should not be taken as an endorsement of other contents of that website.
[1] https://www.treasury.gov.za/comm_media/press/2024/2024%20Two-pot%20System%20Updated%20%20FAQ%20August%202024.pdf
and Allah Ta'ala Knows Best
(Mufti) Ismail Desai
Chairman of Shariah Board and Fatwa Committee
Darul Iftaa, Durban, South Africa
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 organizations to which he may be affiliated with. The opinions and educational information proffered in this communication are based on the jurisprudential understanding and available knowledge of the author. Given that contemporary issues and interpretations of contemporary issues are subjective in nature, another scholar may reach different juristic inferences and conclusions to those as expressed by the author. Whilst every effort has been taken to ensure total academic integrity and honesty, the author is open to corrective measures based on sound academics and juristic inferences. The Shari’ah ruling given herein is based specifically on the specific 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. Any or all links provided in our emails, answers and articles are restricted to the specific material being cited. Such referencing should not be taken as an endorsement of other contents of that website.
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