RRSP investment and pension plan payouts
Question
Here I would like to know the opinion on a question for the RRSP which a savings plan for retirement in Canada.
I contribute $ 30 with each pay, the government pays me $ 30 (because I contribute to the maintenance of Canadian companies) and $ 30 is the tax return. in total $ 90 goes into this pension plan and which will be invested in the stock market. I have no control over the nature of the companies on the stock market. there will be dubious profits since I do not know these companies. I was advised to participate in this scheme on condition that I get rid of the profits from these stock market profits because I do not know if they are halal companies or not.
can I do that ie keep my $ 90 for my retirement.
Answer:
In the Name of Allah, the Most Gracious, the Most Merciful.
As-salāmu ʿalaykum wa-rahmatullāhi wa-barakātuh.
In Canada we have different saving schemes towards pension for an individual. Some of these are mandatory for anyone working, while others are encouraged but not mandatory. CPP (Canadian Pension Plan) for example is a mandated pension plan that takes contribution from one’s wage payout without any volition from the beneficiary.
RRSP (Registered Retirement Saving Plan) has different types of programs within it. RRSP provides an option for fully self-directing where the investments will be done. If the RRSP you have been offered does not have this option, then your volition to not enter such an RRSP is always yours to avoid dubious profits. [1]
What needs to be understood in these schemes is that at the end of the day it is your (the beneficiary) responsibility to do all the legwork and find out the best way for securing the most halal income from your investments.
As for the third portion of “tax return” then it is as per our knowledge only a tax break and not an active contribution towards your RRSP. RRSP contributions lower your net income, whereby relieving you of some taxes until you start withdrawing from the RRSP. So, this tax break is just as any other tax benefits and not related to our matter of RRSP. [2]
For this query we will assume that you have chosen the self-directed RRSP for your investment.
The RRSP will have two portions.
- Your contributions
- Employer’s contribution
In a self-directed RRSP where you will manage the investments avenue, you are Sharʿan bound to only pick halal acceptable avenues for investment. You must speak with your financial advisor to make this happen. If you are not able to do this, and you know for a fact that the RRSP is investing in some interest-based portfolios and assets, then you must use your volition to get out of such an investment. Sharīʿah does not recognize the tactic of voluntary entering in a haram investment with intent to dispose haram elements from the profits. Hence, if self-directed RRSP is not available, it is not permissible to utilize RRSP for investments.
Situations where one is mandated to enter such an arrangement such that one is not able to avoid the interest or other haram elements, one may calculate the haram part of the profits and get rid of it without an intent for rewards. Deliberately entering a haram investment is Iʿāna ʿala al-Maʿsiya (assisting in sin) and sinful.
Once you have made sure all avenues of your investments a sharʿan acceptable, then yield from both these avenues will be acceptable and permissible for you to keep. You may use such RRSP to apply for tax breaks as well.
And Allah Ta’āla Knows Best
Mufti Faisal bin Abdul Hameed al-Mahmudi
www.fatwa.ca
Concurred by:
Mufti Mirza-Zain Baig al-Mahmudi
[1] “If you want to, you can control the assets of your RRSP and make the investment decisions yourself.
Your financial institution can tell you if it offers self-directed RRSPs. The issuer (such as a bank, credit union, trust, or insurance company) can take care of the administrative details, including getting the plan registered, receiving the amounts you contribute, and trading securities.”
[2] “RRSPs also offer an immediate benefit when it comes to your tax return.
The amounts contributed to your RRSP reduces your net income.
The money you contribute to the RRSP and the investment in the plan are sheltered from taxes until you start withdrawing the money.” https://turbotax.intuit.ca/tips/rrsps-and-your-tax-return-the-bottom-line-3892
