With the Muslim population steadily growing in Canada, employers that offer defined contribution pension plans can avoid unintentionally creating a pension gap by providing these members with access to retirement savings solutions that align with their faith.
Under Shariah law, Muslims can’t hold investments that would bring social or environmental harm, such as shares in alcohol or tobacco companies, weapons-related businesses, pork products and adult entertainment. They also can’t hold investments that compound interest.
Until the last couple of years, plan members seeking Shariah-compliant investments were limited in their choices. However, more investment firms are offering solutions that are certified by compliance bodies, such as global Shariah advisory firm Ratings Intelligence.
Commonly, gold is used as an alternative to cash and there are alternative options on the fixed income side, while aspects of Shariah-compliant equity investments are similar to socially responsible investing, says Dimitri Poliak, a principal in Normandin Beaudry’s savings practice.
“There’s a camp that is hesitant to integrate these products because [they think] the more you accommodate — despite the active discussions we have in our society today about accommodation and inclusivity — the more complicated the oversight becomes. To navigate these added complexities, committee training and educational communication are extremely beneficial.”
While employer-sponsored pension plans are designed for the average demographic and not for individual preferences, most employers recognize their duty to accommodate all employees and avoid creating different classes of workers, he notes, adding employers can conduct surveys to gauge interest and provide insights where pension gaps exist.
An employer that establishes a pension plan without providing Shariah-compliant investment options may be at risk of discriminating against employees based on religion, says Natasha Monkman, a pension and benefits lawyer at Hicks Morley Hamilton Stewart Storie LLP.
For instance, Manitoba’s pension legislation requires all full-time employees to join their employer’s pension plan. While there’s an exemption for employees to opt out based on religious grounds, she says an employer could be found constructively discriminating against individuals if it isn’t considering the potential impact of investment solutions that don’t include funds in which a particular group could invest.
“That’s where human rights issues could come home to roost in the future. We haven’t seen any cases yet, but if there are provisions in human rights legislation that say, if there are factors . . . that are related to religion that’s giving rise to . . . differential treatment, then you may be found to have constructively discriminated.”
Monkman views the exemption in Manitoba’s pension rules as a blunt instrument that doesn’t solve the root of the issue, noting an opt-out option still introduces a level of inequity because those employees aren’t getting the benefit that other workers are gaining through their retirement savings plan. “If somebody is looking at a pension plan and says, ‘I cannot participate in this because it’s not compliant with my religion,’ it’s not a real choice.
“Part of why this is . . . getting more attention now is because you’re seeing more DC plans across greater populations [and] greater demographics. More people are being potentially impacted within the context of having to make choices about the funds [they’ve] invested in.”
It’s a reminder of how interdisciplinary pension plan governance, administration and legal issues all intersect with investment policy, human rights and minimum standards from a pension and employment perspective, says Monkman. “It’s finding the balance across all of those different areas, but doing it . . . in a more thoughtful and intentional way . . . so that we’re not unintentionally excluding populations of employees.”