[Q 576] Zakat on Pension Contributions

QUESTION:

In regards to pension plans, there is a strategy where both the employee and the employer contribute the same amount.

My questions is what do i pay zakāt on?

ANSWER:

In a pension plan, whatever amount is deposited by the employee and the employer is generally considered to be in the ownership of the employee. Therefore, if that amount reaches the nisab (minimum threshold for Zakat), then paying its zakat will also be the responsibility of the employee.

Hence, in the situation asked about, if you are already sahib-e-nisab (a person who possesses wealth equal to or above the Zakat threshold), or the total deposited amount together with other items in your ownership reaches the amount of nisab (i.e., the value of 52.5 tolas of silver), then if the other conditions are also fulfilled, paying its zakat will be obligatory upon you.

However, regarding the payment of zakat on this deposited amount, there is a concession that until the entire amount, or at least one-fifth of the nisab (i.e., the equivalent of 10.5 tolas of silver), is received, its payment will not be wahib (necessary/compulsory). But when it is received, then the zakat for all the previous years during which that amount remained in your ownership will be wajib (obligatory) upon you.

It is mentioned in Bahar-e-Shariat (An Ocean of Islamic Law):

“Zakat on a strong debt (دَینِ قوی) becomes wajib year after year even while the debt remains outstanding. However, it becomes payable when one-fifth of the nisab has been received. But only the amount that has been received will be payable; meaning when forty dirhams are received, paying one dirham becomes wajib, and when eighty are received, then two, and so on according to this calculation.”

(Bahar-e-Shariat, Volume 1, Page 906, Maktabatul Madinah, Karachi)

Answered by: Hafiz Jahanzaib (Ask Mufti Scholar)
Translated Answer
Date: 6th March 2026.