Is your scheme discriminating against members on the grounds of religion and belief?

8th June, 2021

  • I was recently asked by Pensions Expert to comment, from a trustee perspective, on a survey which found that one-third of Muslims in the UK do not have a pension due to the lack of sharia-compliant pension options[1]. Related to this is a legal opinion, from Paul Newman QC, that it was against the Equality Act 2010 and pension trustee duties to not provide a few Islamic funds for employees to choose from.

    Among the respondents to the survey who did not have a pension, 78.1 per cent said they did not have one because of sharia compliance. This, according to the article, has prompted calls for trustees to introduce Islamic funds in defined contribution schemes.

    This basic issue – pensions and discrimination on grounds of religion and belief – is not new. Regulations on unlawful discrimination in this area have been around since 2003 and key provisions are now in the Equality Act 2010.

    Moreover, the possibility of unlawful discrimination was well trailed before the automatic enrolment into workplace pensions duty was introduced in 2012. It was noted that most workers would be auto-enrolled into default funds and that some members may have to opt-out if the default fund were contrary to their religious beliefs and there no alternative fund that was compliant with those beliefs. Also, trustees and employers were warned that these members could bring claims of discrimination as a result of having to opt out of their company pension plan.

    Direct discrimination on the grounds of religion or belief is unlawful and so is indirect discrimination, unless it can be objectively justified. Failing to provide investment choices in a defined contribution scheme that fulfil certain religious requirements, such as funds which conform to Sharia law, could stop some employees from joining the scheme on religious grounds. This could constitute indirect discrimination and, given that it should be relatively straightforward to offer investment choices which meet religious requirements, it may be hard to justify not doing so.

    The survey and legal opinion mentioned above have attracted media attention and so trustees and employers should consider whether their pension schemes could be impacted. The issue is very relevant to automatic enrolment schemes, but other DC arrangements could be affected too (even AVC arrangements). 

    [1] Muslims missing out on pensions worth £13bn due to sharia concerns – DC & Auto-enrolment – Pensions Expert (

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    • Published bySusan McFarlane

      Susan leads the marketing function for Dalriada Trustees Limited, and our sister company, Spence & Partners.  The marketing team handles all promotional activity for the companies including business development, marketing, events and PR. Susan joined the business in January 2013, having...

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