The Islamic Pension Trust was developed by Carey Pensions UK, with guidance from IBB’s specialist Sharia compliance department on how it should be structured. It has been launched to address the need for a Sharia compliant pension scheme to meet the criteria for automatic enrolment, as defined by the Government. This means that employers in the UK can meet their legal obligation to automatically enrol eligible Muslim employees into a qualifying workplace pension scheme, without compromising their religious beliefs.
Demand for a Sharia-compliant company pension scheme in the UK has grown in the past 18 months, driven by the ongoing implementation of auto-enrolment and the demographics of the Muslim community. Eligible employees – i.e. those who are not in a company pension scheme, earning more than £10,0000 a year (2014/2015) and aged over 22 but under State Pension Age – represent a large proportion of the Muslim population. IBB’s analysis suggests that 72% of adult Muslims are aged 18-45, compared to 51.5% for the whole of the UK, and 59.1% of British Muslims are in full time employment, compared to 50.3% of the overall UK adult population.1
The automatic enrolment legislation in 2012 had presented a dilemma for employers with Muslim workers. In the absence of a fully Sharia compliant scheme to use for auto-enrolment, complying with the law required enrolling employees in a conventional pension scheme. As Islamic law prohibits the payment and receipt of interest and promotes profit sharing, Muslims are prevented from investing in some equities and therefore the pension funds that contain them. Whilst shares and dividends are acceptable under Islamic law, speculation is not.
The Islamic Pension Trust resolves this issue, with its investments accredited as Sharia compliant by IBB. No income or investment growth is obtained through the payment of interest or unethical business activities prohibited in Islam, such as pornography, gambling, speculation and tobacco. As with IBB’s own products and services, ongoing compliance of the Islamic Pension Trust is guaranteed through continued audit by IBB’s Sharia Compliance Officer and an independent panel of respected Sharia Scholars, the Sharia Supervisory Committee (SSC).
The Islamic Pension Trust is provided by Carey Pensions UK, a long-established, specialist pensions administration and trustee company, which offers a range of pensions products and has won awards for its customer service provision. The Islamic Pensions Trust operates on a master trust basis. From 1 May, IBB will be offering the scheme to its own employees.
Sultan Choudhury, CEO and Director, IBB, said: "IBB is very proud to be involved in the accreditation of the Islamic Pension Trust, a scheme tailored to the specific requirements of Muslim employees. We can all appreciate the importance of sensible financial planning for our future, but until now it has not been possible for employers in the UK to enrol their Muslim employees into a workplace pension scheme without compromising their beliefs. The launch of the Islamic Pension Trust has changed that, as it enables British Muslim employers and charities to provide a fully Sharia compliant workplace pension that meets all of the Government’s criteria for an auto-enrolment scheme.”
Christine Hallett, CEO, Carey Pension UK LLP, said: “Carey Pensions UK prides itself on designing high quality pension products that are well run, offer value for money and support employees with their retirement savings. Our new Islamic Pension Trust is no exception and IBB was the natural choice to provide Sharia accreditation - their range of innovative, Sharia compliant products makes them the clear leaders in the field of Islamic finance in the UK.”
The Islamic Pension Trust provides investors with access to a series of investment portfolios that are held in a Sharia compliant investment service, called the Discretionary Portfolio Service (DPS). The DPS is provided by SMARTfund Administration Limited, and accredited as Sharia compliant by IBB. The portfolios available have been designed to meet the varying needs of the investor, and take into account their risk profile, how long they wish to invest for and other individual circumstances. In addition, the DPS incorporates a de-risking programme which commences prior to retirement and is designed to safeguard against investment risk. This is a unique investment feature for pension structures which are Sharia compliant in the UK. Islamic Pension Trust members will be able to choose any single investment strategy or a blend of strategies via their Independent Financial Adviser (IFA), and influence when they start the de-risking process, should they choose to.
The investment portfolios in the DPS can also be held within general investment accounts, an Individual Savings Account (ISA) or a Self Invested Personal Pension (SIPP). Portfolios are invested in a range of assets including cash, property, Sharia compliant bonds known as Sukuks, equities and commodities. For more information, please go to: www.islamic-bank.com/premier/investment-services/.
IBB has accredited the Sharia compliant auto-enrolment pension scheme in the same year that it celebrates its 10 year anniversary. Since the Bank opened its doors as the UK’s only wholly, Sharia compliant retail bank in 2004, it has attracted over 50,000 customers and has earned a reputation for product innovation. Today, IBB offers the largest range of Islamic retail financial products in the UK.
In February 2014, the Bank was acquired by Masraf Al Rayan QSC (MAR), the world’s fifth largest Islamic bank. MAR intends to build upon IBB’s excellent foundations, investing £75.75m to not only support the continued growth of the Bank’s Sharia compliant savings and home finance products to UK retail customers, but also to significantly develop its commercial business activities.