Is Pension Lawful

[The original posting can be found at:]

QUESTION 1: As a standard part of my employment in public sector in Malaysia, I will receive pension benefits upon retirement. Is this lawful?

In order for us to answer the question, it is important that we first study the rules and principles of the pension scheme in Malaysia.

Pension can be explained as a fixed amount, other than wages, paid at regular intervals to a person or to the person’s surviving dependents in consideration of past services, age, merit, poverty, injury or loss sustained, etc.[1]

In Malaysia, the legislation provides for a pension scheme which is financed and managed by the Government as an employer for the protection of its employees against various contingencies. Pension benefits form part of their conditions’ of service in the public sector. The Government pension scheme covers employees in the public sector who are on pensionable status. Public sector employees include those employed directly by the government, statutory bodies and local authorities. Employees in the private sector are not included in this scheme.[2]

According to Portal Rasmi Bahagian Pasca Perkhidmatan, the objectives of the pension scheme are:[3]

  1. To acknowledge and appreciate the excellent service, with loyalty, dedication and honesty, rendered to the Government by a personnel;
  2. As a bondage for personnel to retain their service with the Government;
  3. To provide the life subsistence for the dependants of personnel who have passed on during the term of service with the Government or after their retirement; and
  4. To develop a form of Compensation Scheme for personnel who are required to retire or passed away due to an injury or contracted a disease because of exposed to harm in the course of carrying out his/her duties.

Thus, pensionable employees in the public sector are entitled to an array of benefits that comprise: (1) retirement benefits (a monthly pension and a gratuity as well as a cash award for accumulated leave), (2) survivors’ benefits (derivative pension and derivative gratuity as well as dependant’s pension), and (3) disability pension. For these benefits, the amount paid is essentially a specified proportion of basic salary. Thus the Government pension scheme is a defined benefit scheme.[4]

From an Islamic point of view, there is nothing wrong with this kind of pension scheme. The contribution made by the government is considered to be a gift (hibah).

Hibah is a practice that is favourable (sunat) in Islam. Allah says in many verses in al-Quran:

“And give the women [upon marriage] their [bridal] gifts graciously. But if they give up willingly to you anything of it, then take it in satisfaction and ease.” [al-Nisaa’ 4:4]

“Righteousness is not that you turn your faces toward the east or the west, but [true] righteousness is [in] one who believes in Allah , the Last Day, the angels, the Book, and the prophets and gives wealth, in spite of love for it, to relatives, orphans, the needy, the traveler, those who ask [for help], and for freeing slaves;…” [al-Baqarah 2:177]

QUESTION 2: My husband has died. My sons and I are still receiving his pension benefits? Can we take it? Is it lawful? Is it considered as an inherited wealth?

As prescribed in the Portal Rasmi Bahagian Pasca Perkhidmatan, if a pension recipient dies, his/her pension may be given to the widow/widower and his/her children regardless the pensionable officer died within or after the period of twelve and a half years from the date of his retirement from the public service.[5] This is called derivative pension. The child, however, according to pension laws, is a child under twenty-one years of age and unmarried, and it includes adopted child, stepchild and illegitimate child. No age limit is required for a disabled child, or mentally or physically and permanently incapacitated and incapable of supporting himself.[6]

The Portal also stated that the derivative pension payment is apportioned as follows:[7]

  1. 2 shares for each widow / widower; and
  2. 1 share for each child.

Before answering the question, it is worth noting that Muslims are generally obliged to abide by the laws of the land they live in, as long as they are not ordered to practice something that is against Shari’ah. In case if they are forced by the law to commit a sin or they are obliged by law to uphold something contrary to Islamic teachings, they have to avoid it if they can, or adhere to the minimum that the law requires of them if they cannot avoid it.

From an Islamic point of view, the pension gratuity or benefits (derivative pension) that the beneficiary and children receive are lawful. One of the objectives of the contribution made by the government is to reduce the burden by providing financial support to the dependents of the pensioner who died during the term of service with the government or after retirement, as a gift of the government to its employees. In this regard, it cannot be categorised as inherited wealth. The 21st Muzakarah (Conference) of the Fatwa Committee of the National Council for Islamic Religious Affairs Malaysia held on 12th September 1988 has discussed derivative gratuity and derivative pension. The Committee has decided that the derivative gratuity and derivative pension are not inheritance; hence the division is not governed by the Islamic law of inheritance.[8]

Allah knows best.


[1], “pension”,, viewed at 25/1/2016.

[2] Lee Kum Chee, The Malaysian Government Pension Scheme: Whither Its Future Direction? Jurnal Ekonomi Malaysia 31 (1997), p. 87.

[3] Portal Rasmi Bahagian Pasca Perkhidmatan, “Objectives of Pension Scheme”,, viewed at 25/1/2016.

[4] Lee Kum Chee, p. 88.

[5] Pensions Act 1980 (Laws of Malaysia), 2006, [Act 227, 15 (1) (a) & (b)], p. 16.

[6] Pensions Act 1980 (Laws of Malaysia), 2006, [Act 227, 15 (1) (a) & (b)], p. 5.

[7] Portal Rasmi Bahagian Pasca Perkhidmatan, “Recipients of Derivative Pension”,, viewed at 27/1/2016.

[8] e-Fatwa, Portal Rasmi Fatwa Malaysia, “Derivative Gratuity and Derivative Pension”,, viewed at 27/12/2016.