Are Defined Contribution Pension Schemes Subject to Zakat?

Yes, defined contribution pension schemes are subject to Zakat, while defined benefit schemes are not. 

The following are the steps to calculate zakat on a defined contribution pension scheme:

1. Identify Zakatable Assets: 

The first step is to identify the Zakatable assets within your pension fund. These include all assets that are subject to Zakat, like cash, stocks, and investments that comply with Islamic principles.

1. Calculate Zakatable Percentage:

After identifying the assets, determine the percentage of the fund that is Zakatable. This means evaluating the portion of the fund that meets the criteria for Zakat.

1. Zakat Calculation:

Once the Zakatable portion is determined, you calculate Zakat due by multiplying this percentage by 2.5%. This is the standard rate for calculating Zakat.

What are Defined Contribution Schemes?

Defined contribution pension schemes are a type of retirement savings plan. The amount you receive upon retirement depends on your contributions and investment performance.

Some common types of defined contribution schemes include:

• Personal pension plans
• Group personal pensions
• Additional voluntary contributions (AVCs)
• Self-invested personal pensions (SIPPs)
• Stakeholder pensions
• Group stakeholder pensions

Hence, Zakat is indeed applicable to defined contribution pension schemes. Always ensure to assess the Zakatable assets properly to calculate the correct amount.

And Allah knows best!