Including the muslim faithful in workplace pensions

Let me start by declaring my prejudice. I am a practicing Christian who for 60 years has been taught that the teachings of Islam are wrong. I am also prejudiced against Islam because of the violence and intolerance I see portrayed in the media and recounted by organisations that I trust, such as Amnesty International. There is no doubt that much harm has been done in the name of Islam, but the same can be said “in the name of Christ”.

I hope that by stating my known prejudice against Islam, I can write an article that allows me to move on and explain why I feel strong about the exclusion of halal investments from UK workplace pensions, despite my not following Islam or subscribing to Sharia Law and principles. My aim is to reduce my prejudice, but I am realistic, that won’t happen overnight, it will take time.

Where I start is in trying to understand the principles of halal investing

“Halal investing is a religious form of investing that complies with Islamic law or Shariah. Islamic scholars help shape halal investing guidelines around topics such as interest, debt, risk and social responsibility”.

I want to understand more about the scholarship that has shaped these investment guidelines so that I can reduce my prejudice and become more literate in another way of achieving the kind of objectives we have for  ESG. My feeling at outset is that there is more that unites us than divides.

To do this , I am going to follow on social media , two people who have made their knowledge available on the web through Islamic Finance Guru.

Mohsin Patel and Ibrahim Khan would qualify , in my book – as scholars. You can read about them here. But they are the door to more knowledge, the Islamic Finance Guru website is really helpful in allowing me an insight into this different way of doing things.

This video may be usefulas a starting point, it made me less nervous.

Including muslims in workplace pensions

When I was researching workplace pension choice for Pension PlayPen, I came across a section of what was then the Carey Master Trust called the Islamic Pension Trust. This was backed by Al Rayan Bank and remains the only workplace pension established for muslims with a Sharia compliant default fund.

This full blown approach uses “sukuk”, a form of fixed income similar to bonds, can take the place of conventional debt instruments in shariah-accepting portfolios. Mohamed Damak, senior director and global head of Islamic finance at S&P Global Ratings, describes sukuk as “the most important asset class” for funds seeking to adhere to sharia law.

But sukuk is currently too expensive to access , to fit within the 0.75% charge cap. So schemes such as Nest and the many who put the HSBC Sharia fund on their platforms.

The Nest Sharia Fund and the HSBC Life Amanah Pension Fund both use investment strategies that mirror the Dow Jones Islamic Markets Titans 100 index, which is designed to measure the performance of the world’s 100 largest shariah-accepted equities.

Nest told Pension Expert in 2016 that

“diversifying beyond global large cap equity is very difficult for a UK pension scheme to achieve in its sharia offering”

Workplace pensions are faced with a circular problem. Lack of demand limits the range of mature markets sharia funds can invest in. If schemes are to adhere to sharia principles and achieve a suitable level of diversification, a solution to the narrow selection of investments will have to be found. This will likely depend on greater demand for sharia compliance.

Although both Nest’s and HSBC’s funds aren’t diversified, anyone who has been invested in one since 2012 (nest) and 2014 (HSBC) should have no complaints on outcomes.

Independent research from AgeWage suggests that relative to the average workplace pension default, the index on which these returns are based has delivered substantial excess return. People have done well. The fund is also available in many  AVC contracts  through the insurance products of  Prudential , L&G and others.

Sharia options are available in most workplace pensions..

But so much more can be done

I came across the Islamic Finance Guru , after reading an article in Pension Expert which claimed that one-third of Muslims in the UK do not have a pension due to the lack of sharia-compliant pension options, missing out on an estimated £12.8bn in savings for retirement.

There isn’t enough statistical evidence to support the accuracy of this number, but work done by People’s Pension in 2018 calculations by The People’s Pension suggests that the UK’s overall ethnicity pension gap – the percentage difference in pension income for pensioners who belong to an ethnic minority group compared to pensioners of a White ethnicity – was 24.4% in 2017-18, or £3,350 a year.

What is sure is that demand is latent.

Lloyds Banking Group have recently introduced a version of the HSBC Sharia fund onto their workplace pension platform. Despite their being no call for it to the Trustees, LBG report a surge in take up both from those switching from other funds and from people joining the scheme for the first time.

This suggests that not including a sharia option, is likely to be excluding those who only want halal investing. The forthcoming  case of Aslam v Uber claims Uber is in breach of Pension Act 1988 and Equality Act of 2010 by effectively excluding Muslim drivers of faith from the company pension scheme.

This has led to NOW pensions, that provides only one (non halal) investment option, to introduce a new sharia compliant investment product. Though this is yet to be put in place, it is promised to be available this spring or summer.

If we employ or expect to employ muslims, we must respect their investment convictions

I started this blog by admitting my 60 year prejudice and I’ll end it by saying that, as with other prejudices, recognising it is one thing but doing something about it is another.

I don’t think I am alone, I suspect that many pension professionals consider sharia investments “tick-box” stuff and pay lip-service to the needs of muslims. Would we do this to other ethnicities? Would we do this to one gender over another?

The prejudice I have is – I suggest – endemic in white British culture and most probably among other non-muslim ethnicities. And it is a prejudice I don’t hear being talked about by anyone in pensions.

So expect me to talk about it more, because it is not good enough to say “we don’t have any calls for a sharia fund in our scheme“. If you employ, or expect to employ muslims, you must respect and cater for their investment convictions.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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4 Responses to Including the muslim faithful in workplace pensions

  1. John Mather says:

    “ There is not one big cosmic meaning for all; there is only the meaning we each give to our life, an individual meaning, an individual plot, like an individual novel, a book for each person.” – Anais Nin

    There is enough conformational bias in these blogs without introducing religion

  2. Tim Simpson says:

    Hello Henry,

    Can I suggest that there are a huge number of Muslims (especially those in the ‘teeth of it) who dislike the differences even more than you but, hopefully, pray to resolve it.

    The Ten Commandments may even be illegal nowadays but,in there somewhere, there used to be the teaching ‘Love thy neighbour’ which I think is a good idea, until forced to take a stand e.g. Ukraine.

    Kind regards,
    Tim Simpson

  3. Pingback: Uber called to parliament about its workplace pension. | AgeWage: Making your money work as hard as you do

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