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When do I pay Khums on the value of the pension money?

Q:

For about 30 years I have paid money into my pension pots and a large sum has built up. I can draw money whenever I want. When do I pay Khums on the value of the pension pot?. Do I have to pay Khums on the full value of the pot now before I draw anything as I am free to draw whatever I want but I will have to pay income tax on it.?

A:

Salaamun Alaykum,

If you gave permission to the pension fund to invest your money and it is likely that it will employ it in a way which is Islamically valid, then that money will count as income for that year and be treated as such with respect to khums. As for the money you withdraw, it is part of that year’s income. Hence, you must pay khums.

We found a similar query on the following site:

https://www.al-islam.org/ask/my-parents-have-a-pension-and-profit-from-a-savings-account-as-their-sources-of-income-is-the-capital-in-the-savings-account-subject-to-khums-given-that-a-large-sum-is-required-to-earn-enough-profit-on-top-of-the-pension-to-cover-all-living-expenses

The answer given: If the saved money came from an income out of which Khums has been paid, then no Khums again on such amount. But if the saved money came from a source of income with out paying its Khums, then Khums on that part of the savings remains obligatory.

Best wishes,
AAA team under the guidance of Sheikh. Zahir Davdani