Two separate forces are working today to undermine retirement security among many Muslims. The first is population pressure. Within less than two decades, it is likely that the support ratio in many Islamic countries (the ratio of people aged 15 to 64 to those aged 65 and older) will drop, shrinking tax bases and making it increasingly difficult for governments to step in and fill the gap. That makes it more important than ever for individuals and private employers to recognise and accept their own responsibilities in this area, and begin programmes of personal savings.

The second issues is that the conventional pension fund operating models we are familiar with from mature retirement markets are often not fit for the purpose under Shariah law. Certain key elements of the conventional fund models are presently considered to be haram (forbidden).

This discussion outlines the unmistakable need in many Islamic societies for greater private pension provision. The non-applicability of annuities and conventional bonds, along with other special considerations, make this a complex landscape indeed. It is also clear there is a need and role for actuaries in contributing to developing a workable framework of Shariah-compliant pension saving.

This article was first published in the November 2013 edition of Middle East Insurance Review.