Understanding Halal Superannuation: A Comprehensive Guide for Muslims in Australia

Muslims in Australia
26. Oct 2023
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Understanding Halal Superannuation: A Comprehensive Guide for Muslims in Australia

Financial security is the dream of everyone. There are many investment options, whether you are saving for retirement or trying to get some investments for your child's future. However, when you are in Australia, as a Muslim, you may face many investment blocks because of Ribah and other policies. 

The superannuation fund is one of the most significant and popular structures in place in Australia to provide you with an income stream after you retire.

But as a Muslim, can you manage your superfund without compromising your faith and values?

Or can you find Shariah-compliant solutions in Australia and manage your finances?

To help figure it out, we have compiled all the information you need about Halal Superannuation Australia and how to find solutions in Australia. 

What is Halal Superannuation? 

Halal superannuation is an investment that adheres to Islamic norms. It does not invest in enterprises that deal with alcohol, gambling, tobacco, or other illegal activities. It also avoids investing in items that pay interest since Islamic law forbids earning from interest (riba).

Why is Halal Superannuation Important for Muslims in Australia? 

Halal super funds enable Muslims to invest their money in accordance with Islamic principles and values. This is significant since some financial activities, such as charging or paying interest (riba), are prohibited in Islam. Muslims can ensure that their retirement earnings are not used to support activities considered haram (forbidden) in Islam by investing in halal super funds.

Superannuation funds are often invested in ethical and socially responsible assets, such as renewable energy, sustainable agriculture, and community services. This corresponds to the principles of many Australian Muslims who wish to invest in ways that help society and the environment.

Contrary to popular assumption, halal super funds can outperform traditional super funds. In fact, some halal super funds have recently outperformed their mainstream counterparts. This means that Muslims can invest in halal super funds while still earning a profit.

Because halal super funds are now available in Australia, Muslims have additional and balanced options for managing their retirement assets. This is significant because many Muslims believe that mainstream super funds do not address their unique demands and ideals.

How does Halal Superannuation Work? 

Halal superannuation operates by investing in businesses that adhere to Islamic standards and offer investment returns without making you compromise on ethical boundaries. 

These businesses are scrutinized to ensure they do not engage in banned activities or earn money from interest-bearing assets. They instead invest in assets that adhere to Islamic ideals, such as real estate, infrastructure, and ethical ventures.

What Is Excluded Under Sharia-Compliant Investments?

Shariah-compliant investing is classified as "socially responsible investing" and is a sort of ethical investing. Shariah-compliant funds use a mechanical screening procedure to discover and eliminate enterprises that do not adhere to Shariah law and Islamic values.  Some of the exclusions for a halal superannuation fund include:

  1. Companies engaged in certain activities, such as conventional finance (non-Islamic banking, finance, and insurance), will be barred from participating in a Sharia-compliant fund. Additionally, companies involved in alcohol, pork-related products, non-halal food production, packaging, processing, gambling, adult entertainment, and tobacco will also be excluded. This exclusion ensures that Shariah-compliant funds align with Islamic ethical and financial principles.
  2. Military funding is likewise no longer permitted in Shariah-compliant investments. Investors do not contribute to funds that may support unjust military action in order to safeguard the sacredness of life.
  3. Tobacco, illegal substances, or alcohol are not permitted in Shariah-compliant investments. They also avoid meat, particularly pork, that has not been slaughtered according to proper procedures.
  4. Islamic super funds do not donate to any type of pornographic entertainment. They will not even support companies that host or distribute adult content.

Let’s talk about Riba and Gharah

Riba is the Islamic name for interest and usury, which is any overpayment. It can be found in a variety of transactions, the most typical of which is lending money at a rate higher than the rate of inflation.

Gharar is an Islamic jurisprudential notion that deals with transactional ambiguity. It arises when there are unknown elements or principles at work, such as when we invest in futures or stocks.

Avoiding Riba and Gharar is critical for Muslims and non-Muslims who want to be ethical investors.

Funds of Islamic Superannuation Australia

The Australian superannuation fund is an Australian retirement trust fund system in which money an employee earns is invested in a fund and made legally available to fund members upon retirement or withdrawal. As of 30 March 2022, Australians have AU$3.5 trillion in superannuation assets, making Australia the world's fourth largest holder of pension fund assets. There are over 500 superannuation funds in Australia, with 362 having assets worth more than $50 million. The great majority of this capital is invested in defined contribution funds.

In Australia, there are three types of superannuation funds: industry funds (not-for-profit mutual funds managed by boards comprised of industry stakeholders), retail funds (for-profit commercial funds managed primarily by financial institutions), and self-managed superannuation funds.1. The Australian Superannuation Market is predominantly composed of 217 funds, with the industry, retail, and wholesale master trusts emerging as the most substantial sectors in terms of net assets.

Where can I find Halal Superannuation Solutions in Australia? 

Several financial institutions in Australia offer halal superannuation. However, locating those institutions might be a task in itself. So, you need to look for the best of the marketplaces. Yes, some of the top superannuation institutions like Hejaz Financial Services, Crescent Wealth, Meezan Wealth, and trading platforms like Gold ETFs are the best move forward. If you need more institutions, you have Ummaup to find suitable ones. 

Bottom Line 

If you want to start investing for retirement in a fund that supports Islamic ethics and adheres to Sharia law, you can look up real estate investments, manufacturing, utilities, and a lot more. So, always keep your eye on the ethical investment options; for guidance, you have popular Australian institutions. To find them, Ummaup is offering a whole database for you. 

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