Saturday, August 6, 2022

British Muslims are missing out on £11.5 billion in pensions, with many unaware of Sharia-compliant options

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A Sharia-compliant pension is a pension that does not invest in non-halal industries such as alcohol, tobacco, pork, the financial sector, weapons and adult entertainment

A third of Britain’s Muslims have no occupational pension, equivalent to 206,720 people in work, according to data from pension company Penfold and Islamic Finance Guru.

There is a £11.5bn pension gap for working British Muslims as many are unaware of Sharia-compliant options, new research has found.

The lack of pension provision can be explained in part by the failure of mainstream industrial companies to offer and adequately communicate Sharia pension options to Muslims.

When asked about the question, 80 per cent of British Muslims without a pension said they were unaware that compliant options existed or were unsure whether the pension they were being offered was Sharia compliant.

A Sharia-compliant pension is a pension that does not invest in non-halal industries such as alcohol, tobacco, pork, the financial sector, weapons and adult entertainment.

Penfold offers a Sharia-compliant pension that is overseen by an elected board to ensure it adheres to the norms of the Muslim faith.

The company calculates that the average person who pays just £50 a month into their pension from the age of 25 with their Sharia fund could expect to have a pension pot of £55,755 by the age of 67.

That means the 206,720 working Muslims without a pension could collectively hold over £11.5 billion when they reach retirement age if directed to pension providers who can offer Sharia-compliant investment options.

The numbers underscore that the pension industry needs to recognize that the needs of today’s savers have evolved.

Annuity providers must make offerings that are consistent with different beliefs and values ​​in order not to exclude anyone from financial security in retirement.

Pete Hykin, co-founder of Penfold, said: “The pension industry is sitting on a ticking time bomb and promises to threaten the financial well-being of hundreds of thousands of people.

“The failure of incumbent operators to offer pension options that meet the needs of today’s savers is not only unfair, it is a reckless mistake that will have far-reaching consequences if left uncorrected.

“The industry invests too much time and resources in developments that benefit few. These efforts are misguided because they fail to make pensions inclusive and customer-centric.”

He added that the ultimate goal of the pension industry is to ensure people save enough for retirement. Therefore, more progress needs to be made and the focus on ensuring that there are retirement and investment options that work for everyone.

“With new, innovative pension options, British Muslims can rest assured that their pension reflects their faith while providing financial security after retirement. Employers and established industrial companies need to follow suit so that Muslims are aware of the options available to ensure their long-term financial security.”

The research is based on the total pot value for a 25-year-old, the average age of a British Muslim who has saved £50 a month into Penfold’s Sharia fund. Penfold calculated the ending pot value if they retired at 67, assuming a growth rate of 5 percent.

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