Fatwa: # 16253
Category: Business Matters
Country: Canada
Date: 17th February 2008


Can I participate in this plan?


My question is regarding the Canadian Registered Retirement Savings Plan (RRSP).  When a person places money into the plan, it acts as a tax shelter (i.e. pre-tax income goes into the plan).  When a person (presumably when they've retired) takes money out of the plan they are taxed on it.  Canada has a progressive income tax income so the idea is that when a person takes money out of the plan they would be taxed less because they would most likely be earning less money in the later years of their life.

I work for a software company designing software solutions and providing maintenance to various clients.  Alhamdulillah the majority of our clients are in the retail and manufacturing sectors, so Allah (through his grace) has saved me from insurance agencies, banks, etc.

In order to encourage employees to save my company has a policy that if an employee contributes a portion of their paycheck to the RRSP plan, the employer will match their contributions by half of the amount that the employee contributes.  E.g if I contribute $2500, my employee would from their end contribute $1250.  The maximum amount that the employer will contribute is 2% of my paycheck (i.e. when I contribute 4% of my paycheck).

I have the option of either investing in a select line of mutual funds, fixed income funds (bonds, mortgages) or so-called guaranteed funds.  This is the equivalent of keeping money in a bank account.  I studied the mutual funds that are provided and found that all of the funds invest at least a portion of the money in banks.  I called up the company who my employer has chosen for our retirement plan, inquiring about where I could keep the money that I put in the savings plan such that I would earn the *least* return (i.e. the equivalent of a checking account) ... There is an option for me to keep money in a DIA (daily interest accumulator account) .. Keeping money in this account means it's not invested anywhere and it would earn me a 1% interest on the principal.

My questions are:
1) Can I participate in this plan.  In answering my query, please consider the following:
a) I'm unsure if the portion being put in by the employer is halal or not... Is it?  I specifically asked my HR manager what benefit the company derives by giving their employees this benefit and she replied by saying ... and I quote: "The sole purpose of employer matching is to encourage employees to save towards their future and <company name> does not in anyway benefit from this matching"
b) I intend to keep all of my money in the DIA fund.  In addition I intend to keep track of the amount I put in, and the interest I've earned and I intend to promptly take out the interest money and give it as sadaqah with no intention of sawab?

Jazakallah Khairan,



In the name of Allah, Most Gracious, Most Merciful

Assalaamu `alaykum waRahmatullahi Wabarakatuh

According to the explanation presented by you regarding RRSP (Registered Retirement Savings Plan), it is permissible for you to participate in the plan on condition:

-it is kept in the DIA (Daily interest accumulation account).
-the interest money is disposed off upon receiving the money.

The contribution of the employer will be regarded as a gift to you.

And Allah knows best


Mufti Ebrahim Desai

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