Offsetting unlawful income with interest paid

Nov 4, 2023 | Business & Trade



Out of naivety and lack of knowledge when undertaking my studies and during employment I enrolled into a student loan along with non Shariah compliant pensions.

Over the course of time the loan accrued interest and I tried my best to abstain from it by directly getting in touch with the Student Loans Company to wipe off the interest and pay the loan figure only however sadly they declined.

I have now paid off my student loan in full including the interest. After doing my calculations, the amount paid equating to total interest payments was £3500 (for simplicity of this query I have rounded this figure).

With regards to my workplace pension (Defined contribution pension) it was initially on a non Shariah compliant fund. I have now eventually switched to a Shariah compliant fund. In light of this, I have worked out that the total non halal value of the pension which was invested into non shariah compliant investments was £2500.

My question was, inshaAllah if I get to the age when I am able to use my workplace pension savings, can the student loan interest money that I paid be offset and deducted against the non shariah money from the pension. i.e. I get to retain the £2500 from the pension as its a surplus of 3500-2500?

Or should the full amount of £2500 be given all in charity once the pension is available to use?

Jazakallah khayra


The way to atone for paying interest is to repent to Allah the Almighty and seek His forgiveness.

Regarding the pension, the funds deducted from your wage, along with any amounts matched by the employer, are deemed lawful for you. However, any additional profits derived from unlawful investments are impermissible for you to take and must be given away in charity without expecting any reward. It’s important to note that you cannot offset the interest paid towards the student loan against the unlawful income from the pension, as these are two independent contracts with different entities.

Answered by:
Ifta Research Fellow

Checked & Approved by:
Mufti Abdul Rahman Mangera
Mufti Zubair Patel