In 2022, the Board considered the legal advice of Lydia Seymour (Counsel) on the issue of members opting out of the LGPS on the basis of their (principally Islamic) religious belief, and whether this might constitute unlawful discrimination on behalf of the scheme. Lydia’s advice suggested that before giving a definitive opinion, we needed to instruct an expert in Islamic finance to provide advice on the issue of whether the LGPS is Sharia compliant, and the range of views that Muslim members and potential members might have on that question. The Board commissioned Mufti Faraz Adam of Amanah Advisors to produce this report.

This report has now been received and examines the issue primarily from the starting point that a statutory defined benefit (DB) pension scheme, like the LGPS, is an extension of the employer/employee contract. The report concludes that as a part of the contractual arrangement between employer and employees, Muslim employees can continue to contribute to, and benefit from, the excellent benefits offered by the LGPS. The underlying rationale for this conclusion is set out below:

The Board would like to thank Mufti Faraz Adam for providing such a comprehensive and considered opinion.

The Board hopes that the report will offer comfort to Muslim members of the LGPS in the knowledge that they can continue to participate in the scheme. Indeed, we hope that the report may encourage some who had opted out to opt back in and ensure that they benefit from the employer contribution to their pension, as well as the valuable benefits that the LGPS offers.

In publishing this report, the Board makes no claim of expertise on the matter of Sharia law and wishes to be clear that this report represents the views of the author and not the Board.

The aim of the Board in commissioning the report was to address possible legal risk for scheme employers, and also to ensure that the LGPS is as inclusive as possible. The Board will now go back to Counsel for her definitive opinion and will consider that advice at the earliest opportunity.

The Board would emphasise that it has no ability to implement directly any recommendations made in the report, it can only make recommendations to the Minister who is responsible for the rules of the scheme. No proposals for changes to the scheme will be considered until the Board has had a chance to fully analyse the further advice from Counsel.

The Board believes that the LGPS offers excellent value for money for members, as employers make a significant additional contribution. Membership provides members and their families with important benefits and greater security in retirement, as well as protection in the unfortunate event of ill-health or death.