subsidized retirement savings account for muslims in germany
As-salamu alaykum dear brothers and sisters,
first of all, I do not want to start another endless discussion about whether stocks are halal in general, or about the boycott topic.
Since I deal with this topic professionally, I would just like to share some information for anyone interested.
Short key facts about the reform:
- From 2027, Germany plans to introduce the new retirement savings account as a state-subsidised, return-oriented retirement savings vehicle without a traditional capital guarantee.
- For the first €360 of annual personal contributions, there will be a 50% subsidy. For contributions from €360.01 up to €1,800, there will be a 25% subsidy. This means a maximum basic allowance of €540 per year.
- In addition, there will be up to €300 child allowance per child and a one-time €200 career starter bonus if the contract is concluded before the age of 25.
- Investment income is not supposed to be taxed during the accumulation phase. Taxation takes place later during the payout phase.
Why this matters for Islamic Finance:
Based on the current state of the reform, all UCITS funds should generally be eligible for the retirement savings account if they are allowed to be distributed to retail investors in Germany and have a maximum PRIIPs risk class of 5 in the Key Information Document. This opening for UCITS funds in the retirement savings account is mentioned in the Finance Committee recommendation, Bundestag document 21/4996.
This means that well-known Shariah-compliant UCITS ETFs could generally fall within the eligible product universe, for example:
- iShares MSCI World Islamic UCITS ETF / ISIN IE00B27YCN58: PRIIPs risk class 4 according to the KID.
- iShares MSCI EM Islamic UCITS ETF / ISIN IE00B27YCP72: PRIIPs risk class 4 according to the KID.
- iShares $ Sukuk UCITS ETF / ISIN IE000929U2U9: PRIIPs risk class 2 according to the KID.
So the real question is not only: “Are Islamic ETFs allowed?”
Based on the current state: generally yes, provided they are UCITS funds, are distributable to retail investors in Germany and have a maximum PRIIPs risk class of 5.
The bigger issue is the practical implementation.
With Islamic equity ETFs, purification of non-Shariah-compliant income are in the most cases necessary. In a normal brokerage account, this is generally manageable. In an retirement savings account, however, it becomes much more difficult, because you cannot simply withdraw money from the subsidised retirement contract and donate it without potentially triggering tax recalculations, repayment of subsidies or harmful use of the subsidised assets.
This is why Sukuk ETFs are especially interesting. If the future retirement savings account requires a “safer” or lower-risk building block, a conventional bond ETF would be problematic for many Muslims. A Sukuk ETF with risk class 2 could be a Shariah-compliant alternative — assuming the structure, Shariah board and methodology are accepted.
Then there is the issue of Zakat. Even if the retirement savings accountis invested in halal products, it remains unclear how Zakat on locked retirement assets should be calculated and paid. You probably cannot simply withdraw the Zakat amount from the retirement savings account. So it would likely have to be paid from external funds — but for that, investors would need reliable data on the Zakatable portion of the assets.
My thesis is that these aspects are not being taken into account and, due to the focus on mass-market appeal, are unlikely to be revised. Therefore, the retirement savings account will maybe not a suitable solution for us.
No financial advice and no fatwa.
May Allah bless all your investments. Allahumma Amin. :)