The LGPS and Shariah Compliance
The LGPS and Shariah Compliance
The LGPS and Shariah Compliance
An independent Islamic finance scholar, acting as an expert consultant and commissioned by the LGPS Scheme Advisory Board, has reviewed this pension scheme and concluded that membership of the LGPS is Shariah compliant.
The LGPS Scheme Advisory Board advises the government department that sets the LGPS rules through Parliament.
Key points:
- Pension contributions are treated as part of wages, not as a loan.
- Pension benefits are contractual entitlements, not dependent on interest rates.
- Independent experts have confirmed that joining the LGPS does not compromise Islamic principles.
There is also a Shariah compliant AVC, should you wish to invest further into your pension.
You can read the full report here: An Opinion on the Shariah Compliance of LGPS
We have also created some frequently asked questions below that you may find helpful.
We hope this reassures you that the LGPS is accessible to all.
Yes. An independent Islamic finance scholar, commissioned by the LGPS Scheme Advisory Board, reviewed the scheme and confirmed that membership is permissible under Shariah requirements.
- Contributions = deferred wages: Your pension contributions are treated as part of your salary package, not as a loan, so they do not involve interest (riba).
- Benefits = contractual entitlement: The pension you receive is a right you earn through your work, not dependent on interest‑bearing arrangements.
- Investments are indirect: While the LGPS invests in a wide range of assets, your relationship is with the scheme, not with specific investments. You are not personally responsible for where the scheme invests.
The Islamic scholar’s opinion is that this does not affect the permissibility of joining the scheme, because you are not directly choosing or controlling those investments. However, the Scheme Advisory Board has been encouraged to explore Shariah compliant investment options in the future.
No. The expert opinion is clear: you can join the LGPS with confidence. Your pension is part of your lawful earnings as an employee.
The report recommended that LGPS consider offering Shariah compliant investment sub funds in the future. This would give Muslim members additional peace of mind, but it is not required for the scheme to be compliant now and would require legislation, so it is not something either your employer or pension fund can do.
- You can safely and confidently join the LGPS without breaching Islamic principles.
- Your pension benefits are secure and recognised as Shariah.
- The scheme is considering ways to be even more inclusive.
Joining the LGPS is fully permissible. Your pension is part of your lawful earnings, and independent Islamic finance experts have confirmed this.
Joining the LGPS does not compromise your faith. It ensures you and your family benefit from a secure retirement.
For more details:
- See the full report: An Opinion on the Shariah Compliance of LGPS
- Speak to your HR or pensions team if you would like further guidance.