Choosing the Right Islamic Superannuation Fund

For Muslims in Australia, choosing the right superannuation fund is more than just a financial decision—it’s a profound expression of faith and values. Superannuation plays a vital role in preparing for retirement, but for those adhering to Islamic principles, the challenge lies in finding funds that are Shariah-compliant.

Islamic superannuation funds offer a way to invest in your future without compromising your beliefs. They ensure that your money is managed in line with Islamic finance principles, avoiding industries and practices prohibited in Islam. As awareness of Islamic finance grows, more Australians are turning to these funds as a viable alternative.

But with the increasing number of options available, how do you choose the right one? This overview provides general information to help you understand your options before making a decision.

What is an Islamic Superannuation Fund?

Islamic superannuation funds are designed to align with the principles of Islamic finance, offering a Shariah-compliant alternative to conventional super funds. They prohibit the earning or paying of interest (riba) and avoid investments in haram (forbidden) industries such as alcohol, gambling, tobacco, and unethical activities. 

Instead, these funds prioritise halal investments in industries like healthcare, technology, renewable energy, and real estate. This approach not only ensures compliance with Shariah but also promotes sustainability and social responsibility.

Key Features of an Islamic Super Fund

• Shariah Compliance: All investments are approved by qualified Shariah scholars or boards, ensuring alignment with Islamic principles.
• Shariah Investment Screening: Funds avoid industries that conflict with Islamic values, focusing instead on halal opportunities.
• Profit-Sharing Model: Returns are generated through trade, investment, and leasing rather than interest, ensuring profit-sharing mechanisms.

Comparison to Conventional Funds

Conventional superannuation funds often focus solely on maximising financial returns, regardless of the Shariah or moral implications of their investments. Islamic super funds, on the other hand, strike a balance between competitive returns and adherence to Shariah principles, offering a meaningful alternative for those who prioritise values-driven investing.

Key Considerations When Choosing an Islamic Super Fund

Selecting the right Islamic super fund requires careful research and evaluation. Here are the key factors to consider:

1. Shariah Compliance

The foundation of any Islamic super fund is its adherence to Shariah principles. To ensure compliance:

• Look for certification by recognised Shariah boards or scholars with expertise in Islamic finance.
• Investigate the fund’s screening process to verify that all investments align with Islamic guidelines.

2. Investment Portfolio

Transparency is essential in understanding where your money is invested. Islamic super funds provide detailed reports outlining their investment portfolios. These typically include:

• Halal Sectors: Investments in socially responsible industries like healthcare, renewable energy, and technology.
• Sustainability: Many funds prioritise sustainable and responsible projects, reflecting broader social values.

3. Fees and Charges

Administrative and management fees can vary significantly between funds. It’s important to compare: 

• Fee Structure: Ensure the fees are competitive and do not erode your returns over time.
• Long-Term Impact: Lower fees often translate to higher long-term savings, making this a critical consideration.

4. Performance and Returns

While Shariah compliance is crucial, you should also evaluate the fund’s financial performance: 

• Review the fund’s historical returns to assess its profitability and stability.
• Consider how the fund balances halal investments with achieving competitive returns.

5. Additional Services

Many Islamic super funds offer extra features that enhance their value, such as: 

• Financial Advice: Tailored guidance on Islamic finance and superannuation.
• Online Tools: Calculators, mobile apps, and resources to manage your super efficiently.
• Customer Support: Dedicated teams with expertise in Shariah-compliant finance.

Steps to Transition to an Islamic Super Fund

Switching to an Islamic super fund might seem complicated, but following these steps can make the process smoother:

1. Research Your Options: Compare Islamic super funds based on compliance, investment portfolio, fees, and performance. Look for funds that meet your financial requirements.
2. Review Your Current Super Fund: Before transitioning, review your existing fund for any exit fees, insurance implications, and tax considerations. This will help you avoid unexpected costs.
3. Consult a Financial Advisor: Seek professional advice to understand the financial and legal implications of switching to an Islamic super fund. A financial advisor can also recommend funds that align with your long-term goals.
4. Initiate the Transition: Many Islamic super funds provide guidance and tools to simplify the transfer process. This often involves completing a rollover form and updating your employer with the new fund details.

Benefits of Choosing an Islamic Super Fund

Choosing an Islamic super fund offers numerous benefits beyond financial security. These include:

Shariah and Spiritual Alignment

Islamic super funds ensure that your retirement savings are invested in ways that align with your faith. This provides peace of mind, knowing that your money is not contributing to haram industries or practices. 

Socially Responsible Investing 

By focusing on halal industries, Islamic super funds contribute to sustainability and positive societal impact. This approach often resonates with individuals who value socially responsible investments. 

Long-Term Financial Growth 

Despite their restrictions, many Islamic super funds deliver competitive returns by focusing on profitable and sustainable investments. This ensures that your financial goals are met without compromising your values. 

Enhanced Transparency

Islamic super funds often provide clear, detailed reports about their investment portfolios and performance, giving you greater confidence in how your money is managed.

Ready To Take Control of Your Financial Future?

Choosing the right Islamic superannuation fund is an essential step in aligning your financial future with your faith. By considering factors like Shariah compliance, investment portfolios, fees, and performance, you can ensure your super fund reflects your values while securing long-term growth. 

To learn more about Islamic superannuation and explore your options, visit the Hejaz Islamic Superannuation page. Gain insights into how Hejaz invests, review fund performance, and explore detailed guidance in the Islamic Superannuation and Retirement Planning blog. 

Take control of your future and secure your retirement with confidence. Discover the benefits of an Islamic super fund with Hejaz today.

Disclaimer:
This publication is prepared by Hejaz Asset Management Pty Ltd ABN 69 613 618 821, AFSL 550009, as the Fund Manager and the Promoter for the Hejaz Islamic Super and Pension products. The information contained in this publication is for general information purposes only. It is prepared without taking into account your objectives, financial situation, or needs. It is not an offer or recommendation to make any investment or adopt any investment strategy. Consider the PDS and TMD on our website before deciding whether the product suits you.