Two-Pot System (Follow Up Query)

Question

I have noted the Fatwa regarding the two-pot provident fund. I am part of an involuntary pension fund so I assume that the application will be the same, since I also have an accessible portion. Two issues come to mind after going through the response to the initial question posed:

Q1) Since the funds in the savings pot are immediately accessible, they will now form part of Zakaatable wealth. What is of concern to me is that even though the funds are accessible, it is still taxable. By way of example, an individual has roughly R100 000 in his savings pot. Should he opt to withdraw the R100 000, then the amount will be taxed at his current marginal tax rate of 41%. Meaning, in real terms, he only stands to receive R59 000 into his pocket should he try to access the savings pot. SARS will take the other R41 000. My question here is, is he liable for the Zakaah on the R100 000 that is available before tax, or the realistic amount of R59 000 after tax?

Q2) Since the fund is involuntary, previously the payout was not considered in terms of Islamic inheritance. Considering the savings pot is now an available amount, should a person pass away, is this portion now to be considered as part of Shar’i inheritance? At the point where a person passes away, then the two-pot system becomes unclear because there are personally nominated beneficiaries, as well as the discretion of the trustees of the fund.

Mufti Abdul Kader Fazlani · Accepted Answer

A1) Zakaah will only be paid on the net amount received in one’s account. Hence, in the example cited in the query, Zakaah will only be discharged on the R59 000, as that is the amount that belongs to one.

A2) A mandatory provident fund, when paid out, is considered as a gift from the company to the beneficiary/ies stipulated by the employee. It is not necessary that one’s Shari’ee heirs are stipulated as beneficiaries of the fund, nor is it necessary that the funds be distributed according to the Shari’ee law of succession.

If an employee, for example, stipulated his wife as the sole beneficiary of the funds, then she will be fully entitled to the said funds.

Now, with the two-pot system in place, the fund is still considered as a gift from the employer since it is mandatory. However, the difference is that when one withdraws the savings pot in one’s lifetime, then the money which is withdrawn will form part of one’s estate and the funds will be distributed in accordance to the Shari’ee law of succession. If one passes away, then whatever is in the retirement pot will be given to the beneficiary who the deceased had selected; and the savings pot will be distributed according to the Islamic laws of inheritance.

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