National Social Security Fund, The social protection fund operated as a network collective device previous to the colonial period. The colonial government proposed establishing a provident fund for African workers. They noted that the pension scheme changed into now no longer favorable because it required the investment of huge resources and subsidies through the government. Following independence, the Kenyan government announced the implementation of social protection for its people.
The National Social Security Fund (National Social Security Fund) changed into established through an Act of parliament Cap 258 in November 1965, however, contributions commenced in July 1966 to permit it to perform because the National Provident Fund. Since her independence Kenya has passed through several pension reforms, culminating in the enactment of the NSSF Act in 2013. The pension scheme has acquired huge interest from the Muslim clerics. Some fatawahave been issued stating that the retirement benefits are now no longer Sharī‘ah compliant.
This scenario may jeopardize the retirement purpose and placed the retirees in monetary trouble through denying them their benefits. The predominant goal of this examine is to assess the conformity of Sharī‘ah (National Social Security Fund) in Kenya’s pension fund operation. Inductive technique changed into used to have a look at the operational methods of the social protection fund from both the perspectives of pension scheme and Islamic jurisprudence in order to mutually combine them.
Likewise, the researchers used the analytical approach to clarify the opinions of the Muslim students concerning the pension scheme merchandise and to focus on a few regions of inconsistency with Islamic law in order to provide Islamic alternatives. The results showed that pension scheme price range are inconsistent with Islamic law. Therefore, it’s miles encouraged for NSSF to open Islamic windows to meet the demands of the Muslim workers looking for Sharī‘ah compliant merchandise / services.
Introduction of National Social Security Fund
The Social safety fund operated with inside the pre-colonial length as a network systemin 1961.1However, the colonial authorities advocated the established order of a provident fund for Africanemployees. But they noted that the pension scheme changed into now no longer favorable as it wished considerable sources and subsidization from thenational treasury.
After independence, the Kenya authorities declared the advent of social safety for its residents however found out that they couldn’t manipulate to acquire their goal thanks to the dearth of economic sources and the boom rate ofthe population. Therefore, the authorities set up National medical health insurance and National provident schemes, despite the fact that financial savings in provident schemes have been now no longer obligatory for all workers.
The National Social Security Fund (National Social Security Fund) changed into set up by an Act of parliament Cap 258 in November 1965, however contributions began in July 1966, operating as a national provident fund.
Kenya’s retirement blessings have lately been divided into categories: public schemes and (National Social Security Fund) private schemes. Later, the NSSF Act 1965 and its regulations have been revoked by the NSSF Act 2013. It changed into converted from a Provident Fund to a Pension Scheme to which every hired Kenyan citizen has to contribute a certain percentage of his/her gross revenue to be assured simple reimbursement withinside the case of disability, demise or pension upon retirement.
The Act establishes finances known as: (National Social Security Fund) the Pension Fund and the Provident Fund. The exceptional finances are: the pension fund is obligatory for personnel withinside the formal financial system and is paid monthly,whilst the provident fund is voluntary for the self-hired and is paid in a lump sum payment.
The charter of Kenya 2010(National Social Security Fund) states that “every Kenyan has a right to social safety”; and Article 21 of the identical charter commits that “the kingdom ought to take anything legislative, coverage,and different measuresas necessary, which includes the placing of well known to make certain effective and green provision of social safety.”The pension system affords a platform for personnel to makemonthly contributions to cover their living expenses during retirement and different results consisting of demise or invalidity, amongst others.
The NSSF Act assented to Article (National Social Security Fund) and Article 21 of the Kenya charter, imaginative and prescient 2030, National Social safety coverage of 2013 and the 1952 conference 102 of ILO. NSSF in 12 months 2017-2018 gathered a large fund as in comparison to preceding years: “we recorded a surplus of Ksh. 25.75 billion in comparison to Ksh. 23.89 billion withinside the preceding 12 months.” Our fund fee grew from Ksh 196.fifty seven billion to Ksh.
Seventy three billion, an equal of a 13% increase. This boom is attributable to prudent investments.”6The NSSF investment portfolio includes: Deposits, GOK Securities, Corporate Bonds, Equities, Properties and TPS.7It is obvious that the maximum economic instruments are now no longer Sharī‘ah compliant. A pension fund must be managed in accordance with Islamic law, meaning it must be free from elements of Riba, Maisir, Ghararand different void elements.
Furthermore,there are many studies that have been carried out to investigate pension schemes in Kenya however have yet to cover the pension scheme from an Islamic perspective. This paper is, therefore, a continuation of the discussion on the pension schemes in Kenya froman Islamic Sharī‘ah perspective. It critiques the forms of contributions, economic instruments, and retirement blessings National Social Security Fund, in addition to factors out regions that name for improvement.
Assessment of Pension Schemes
- Mandatory Contribution
According to NSSF Act forty five of 2013 Section 20 and Act forty five Section 19 ,8every enterprise who employs one or extra personnel shall sign in and make a contribution 12% break up as follows:-Employer 6% and personnel 6% of the earnings. Furthermore, each enterprise who fails or refuses to sign in personnel below the NSSF scheme commits an offense and shall be liable to a fine not less than Ksh 50, 000,equivalent to US $500.
It is evident that contribution to the scheme is obligatory for every body who meets the situations regardless of his/her income level.Its aim is to maintain the standard of living of its participants. Arising from the above discussion, there are controversial problems many of the Muslim pupils about obligatory contribution to pension schemes. Some pupils have objected to obligatory contribution National Social Security Fund, but those who advocate obligatory contribution hold that it is permissible below Islamic law’s precept of co-operation.
Even aleven though each sections of the Muslim pupils percentage a few criminal proof, as follows: Pension scheme is permissible. This opinion turned into supported through Sheikh Dr. Abdallah bin Abdul rahman Al-jibrein after he launched the announcement as follows: “There has been a lot of argument about what the government is doing in deducting salaries from the personnel referred to as pension scheme National Social Security Fund, or what different Saudi corporations did.
For example, withinside the Aramco company, after retirement age, the employee gets a non-stop earnings for the relaxation of his life, or for his minor offspring after him, or a gratuity. On the opposite hand if his carrier is of a quick time period,he’s given an advantage. What is deducted from his earnings and given double or half and this transaction is loose from interest.”Sheikh Mohammad Utheime in responded to the equal issue, saying, “It is permissible to take pension fund due to the fact it’s far a praise from personnel’ earnings while needed.”
In the equal depend, Sheikh Abdulaziz bin Bazreplied “it’s far permissible to take, and this fatwa has been issued bysenior pupils.”The equal opinion was seconded through the permanent committee for scholarly and studies and Iftaas follows:“If that is the case, it’s far permissible to take a retirement pension National Social Security Fund, due to the fact it’s far a praise for the carrier you carried out all through your paintings for the government.”
They assist their opinion with the subsequent justifications: Mandatory contribution does now no longer contradict the principle of Sharī‘ah where a pension scheme aims to reap cooperation, unity and justice many of the members. Furthermore, personnel make contributions a whole lot much less than what they’ll acquire after retirement, due to the fact any extra is rewarded and motivates employees In this regard,the prophet Muhammad (SAW)said: “Man’s property may now no longer be taken except together along with his goodwill.”
Another justification is that the employee donates to needy colleagues. The nation donates what it can pay its personnel as it does now no longer are trying to find any take advantage of its citizens. The situationissupported through holy Qur’ānverse “Cooperate with each other in goodness and righteousness, and do now no longer cooperate in sin and transgression.”
They additionally arguethe pension scheme is a bond and praise from the nation to its citizens. The retirement device takes under consideration the pursuits of the personnel, and it’s far consequently permissible to acquire a present as an advantage from the nation. Another point of contention is that theIslamic nation is the guardian of its personnel.Therefore, they advocate pension scheme to take care of personnel after retirement.
The nation might not satisfy the desires of the personnel except thru their salaries, which they take as gain after retirement. In fact,it’s far a depend of cooperation which Almighty Allah commanded withinside the Qur’ān. Other jurists argue that mandatory contribution is unlawful due to the fact it carries some of felony prohibitions, including: the life of Riba Fadl,because it includes the alternate of cash for cash with a further quantity, and it additionally carries a issue of Riba Al-Nasi’ah, as it is postponed indefinitely until one retires.
Mandatory contribution additionally carries an detail of gambling,as members pay a sure quantity of contribution withinside the wish of receiving a massive quantity, or vice versa. They additionally argued that gambling comes into life while a participant dies all through the earlier period of the settlement. Mandatory contribution consists of an unlawful condition, specifically shareholder apathy.
A settlement that is primarily based totally on illegal elementsis now no longer legitimate as Allah (SWT) said: “O believers! Do now no longer eat each other’s wealth illegally, National Social Security Fund however as an alternative exchange through mutual consent.”On the alternative hand, a few Islamic pupils consisting of Sheikh Al-Burak have argued that:The Pension scheme is a western monetary device inherited and implemented through the Muslim society with out being detached to what Islamic regulation calls for.
An instance of coverage is a pension scheme which engages in deduction of a sure quantity of earnings from the personnel and can pay month-to-month after retirement throughout their life. For instance National Social Security Fund, if a member dies after or before retirement age, the pension board will terminate all contributions. Therefore, the pension scheme is illegal, as it carries the detail of Ribaand Maisir.
After near commentary of the 2 opinions, the researcher concurred with the bulk of Muslim jurists for the subsequent reasons:
- Theinterest calls for obligating personnel to make contributions to the pension scheme is to get solid earning if you want to be interrupted after retirement due to disability, unemployment, and povertyand so on. That is why the nation deducts salaries for the blessings of personnel and this doesn’t contradict the Islamic Law.
- The Islamic Law encourages saving and averting beside the point expenditure.
- Mandatory contributions will addto developing a country through accumulation of saving National Social Security Fund National Social Security Fund, retaining economic balance and channelingfunds into long-time period investments.
- The pension control transactions scheme is loose from Riba al-Fadl; due to the guideline of thumb of alternate counter value, one must be exchanged on spot and two commodities must be identical in quantity. Also, it’s far loose from Riba al-Nasiah because reimbursement of deduction in go back for added price is a praise from the nation.
In the opposite verses, Allah (SWT) said: “And provide the relative his right, and [National Social Security Fund] the negative and the traveler, and do now no longer spend wastefully.Indeed, the wasteful are brothers of the devils, and ever has Satan been to his Lord ungrateful.”
Spending wastefully turned into forbidden on the equal saving a part of earnings is highly recommended. Narrated Salama bin Al-Aqua, Prophet Muhammad (SAW) advocated tosaving, This is primarily based totally on a hadith recorded withinside the bookof Al-Ihsan fi Taqrib Sahih ibn Hibbānin which Prophet Muhammad (SAW) said,“Kulū wa Ātimū wa Idahirū”(National Social Security Fund).
Without a doubt, saving allows whilst an emergency arises, necessitating the hunt for additional funds. Therefore accumulated saving can assist ease the situation. It turned into a great caution against job loss. (National Social Security Fund)Lastly, saving will accumulate into a substantial quantity in order to assist put together for retirement,due to the fact many retirees do now no longer have sufficient cash to cater for his or her needs.
Based at the above discussion, voluntary contribution to pension scheme is fashioned on the idea of Islamic co-operative insurance. This view is supported via way of means of Dr. Wahba Zuheili who said“Voluntary contribution to the pension scheme it’s far aco-operative insurance.”
In legal perspective, Co-operative insurance (National Social Security Fund) is described as “an association primarily based totally on mutual help below which takaful participants conform to make a contribution to a not unusual place fund presenting for mutual monetary benefits.
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