Should I Remove the 2.3 Percent Interest from My RRSP and Then Switch to a Halal Provider?
Question
So, the RBC, the 2.3 interest reinvested, calculate exactly that amount and those 2.3 interest that they invested before, giving it for charity, and the rest is good. However, we encourage you to switch your RRSPs to Manzil because they have halal RRSPs, and you can talk to your company if it’s possible. If it’s not possible, then you should remain with your company, making sure that they are investing in high-risk stakes, oil and gas, or tech companies, rather than bank bonds and interest.
Answer
Alhamdulillah, wassalatu wassalamu ala rasulillah, wa ala alihi wa sahbihi ajmain.
1. The Shari Context
Riba is explicitly and decisively prohibited. Allah says:
“Allah has permitted trade and forbidden riba.”
Surat al Baqarah 2:275
The prohibition is tied to a guaranteed increase over capital in a loan or deposit. If your RRSP funds were placed in a guaranteed interest-bearing product and generated a fixed return, that increment falls under riba.
However, an RRSP itself is merely a tax-sheltered investment account. The Shari ruling depends entirely on what the funds are invested in — whether interest-based instruments or equity-based investments.
2. Scholarly Discussion
The four madhahib are in agreement that any stipulated, guaranteed increase over a loan is riba and impermissible. The effective cause is the guaranteed increment tied to capital without exposure to risk.
Equity ownership, on the other hand, is permissible in principle because profit is tied to risk and market performance. Modern retirement investments therefore must be evaluated based on their structure.
If a Muslim unknowingly receives riba, he is not sinful for the past due to lack of knowledge. Once aware, he must remove and dispose of the unlawful increment. The principal remains lawful. The interest portion must be given away without seeking reward.
As for switching providers, the Sharia does not require a specific institution. It requires avoiding riba. If a Sharia-screened investment option is available and practical, that is preferable.
3. Application to the Question
If the “2.3 interest reinvested” represents actual fixed, guaranteed interest from a savings product or bond-based fund, then you should:
- Determine the exact dollar amount of the interest generated.
- Remove that amount.
- Give it away in charity without intention of reward.
- Retain your principal and any lawful market-based gains.
If the 2.3 percent reflects market growth of an equity fund and is not guaranteed interest, then it is not riba. You must confirm whether it was a fixed-interest instrument or a market-based return.
As for switching to a halal RRSP provider:
If your employer allows redirection to a Sharia-compliant option, that is preferable.
If the employer restricts you to its internal plan, then you should remain but choose equity-based funds and avoid bond funds, guaranteed interest accounts, or fixed-income products.
The issue is not “high risk” versus “low risk.” The issue is whether the investment structure is interest-based or equity-based. Oil, gas, or tech investments are not automatically halal; they must meet Sharia screening standards regarding core business and debt exposure.
4. Relevant Usul Principle
الحكم يدور مع علته وجودا وعدما
The ruling revolves around its effective cause, present or absent.
The prohibition applies only when the cause — guaranteed interest — exists. If you remove the interest-based structure and invest in permissible equity funds, the cause no longer exists and the ruling changes accordingly.
الأصل في المعاملات الإباحة
The default ruling in financial transactions is permissibility.
Financial structures are presumed lawful unless a prohibited element is present. An RRSP is not inherently haram; it becomes impermissible only if it contains riba or other forbidden components.
Final Ruling
If the 2.3 percent represents guaranteed interest, you must calculate the exact amount earned from that interest and give it away without intention of reward. The remaining principal is lawful. If possible, switch to a Sharia-compliant investment option such as MANZIL HALAL RRSPS.
If not, remain in the company plan but select equity-based funds and avoid bond or interest-based products. The permissibility depends entirely on the nature of the underlying investment.
And Allah knows best.