Muslims To Be Offered Sharia-Compliant Pensions by Government
By Martin Beckford, The Daily Telegraph
November 21, 2008
The scheme to provide retirement funds for millions who do not already have a company pension is likely to include a special option that would not invest in companies deemed sinful under Islam.
Ministers are keen to get Muslims saving with the Personal Accounts Delivery Authority, as many who have low-paid jobs or who have moved to Britain in recent decades are unlikely to have put away much for their old age.
The decision to provide a Sharia-compliant pension fund is another sign of the growing influence of Islamic law in British public life and in particular the country's finance industry.
The prospect of some aspects of Sharia law such as divorce proceedings and dispute resolution being enshrined in the English legal system – raised by the Archbishop of Canterbury and Lord Chief Justice this year – remains highly controversial because of fears that the system discriminates against women and that a two-tier approach would be divisive.
But more and more financial products are being tailored to cater for Britain's population of 2million Muslims.
The religion's holy book, the Qu'ran, forbids Muslims from making money from money, so they cannot use products that involve the charging of interest nor invest in traditional financial services firms.
Gambling, drinking and pornography are also seen as immoral under Islam, so Muslims cannot put their money into companies that promote these activities.
The Islamic finance market is estimated to be worth £500million already and is growing rapidly.
Families can already get Sharia-compliant baby bonds under the Government's Child Trust Fund scheme while the UK is likely to become the first Western country to issue Islamic bonds in order to raise money from the Middle East.
This year has also seen the launch of Britain's first Islamic insurance company and pre-paid MasterCard. There are a handful of wholly Islamic banks in the country and several more that offer alternatives to mortgages which do not involve the charging of interest.
When the Personal Accounts Delivery Authority launches in 2012, as many as 10 million people who do not have a decent occupational pension will become automatically enrolled and made to save a minimum of 4 per cent of their earnings a year, matched by a 3 per cent contribution from their employer and 1 per cent tax relief from the Government.
Savers will be able to choose from a range of funds into which their money will be invested, with one option likely to be Sharia-compliant.
A spokesman for the authority said: "In early 2009 we will be consulting on the potential approach to investment. Issues that we envisage incorporating into the consultation document include the overarching investment objective, the default strategy and lifestyling of funds and fund choices beyond the default strategy.
"This will include the appropriateness of making available religion compliant funds (e.g. Sharia) and funds focussing on social, environmental and ethical issues."
Its plan was backed this week by a report by the Pensions Policy Institute and the Equality and Human Rights Commission on how to improve the lot of Britain's "under-pensioned", such as disabled people, women and ethnic minorities, who in many cases have not worked long enough to be entitled to a full state pension of £90.70 a week when they retire.
The study said: "The inclusion of a Sharia-compliant investment choice might be important to encourage participation among some ethnic minority groups."
Douglas Murray, director of the Centre for Social Cohesion think tank, said the Government should not be creating parallel financial or legal systems for different groups in Britain.
He said: "It's a great mistake for the Government to think this is desirable or even necessary."
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