Shortage of Sharia-compliant pensions lets down savers
A lack of Sharia-compliant pensions is leaving many people unable to save for retirement.
A row between Uber and some of its drivers is shining a light on how many Muslims feel unable to save for retirement because they do not have access to Sharia-compliant pensions.
Trade unions representing Uber drivers say the ride-hailing app’s introduction of a pension scheme that does not offer a Sharia-compliant fund is letting down Muslim drivers, who account for a majority of its workforce. Union leaders have now threatened Uber with legal action. The row underlines the broader need to ensure Muslim savers and investors have access to pension plans that enable them to plan effectively for retirement.
To comply with Sharia law, pension funds must not invest in companies involved in activities that contravene the principles of Islam. This will include businesses that produce or sell alcohol, tobacco, arms and pork. Funds with exposure to gambling also fall foul of Sharia laws – even some financial services will render funds non-compliant.
Research published last year found 30% of Muslims in the UK did not have a pension, with the lack of Sharia-compliant options cited as the leading reason.This represents a market failure, since the UK is home to 3.4 million Muslims, but some pension providers are taking advantage of that opportunity. Both Nest and The People’s Pension offer Sharia-compliant funds to millions of savers in work-based pension plans.
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• The number of British expatriates living in countries where they do not receive increases to their UK state pension now stands at almost 500,000. Britons can claim their state pension even if they retire overseas, but it will only increase in line with raises in the UK if their new home has a social security agreement with Britain. In most countries (including Australia, Canada and New Zealand), their pension is frozen at the level payable when they begin claiming. The anomaly now affects half of all Britons moving overseas.