Takaful Retirement Annuity Plan in Malaysia: A Proposed Model
Keywords:annuity, longevity risk, hibah mu'allaqah, gharar, maysir
Islamic insurance, hereafter referred to as takaful, is established on the concept of mutual assistance and mutual assurance between participating members who undertake to mutually guarantee and indemnify one another in case of a particular defined event. This concept has been widely used to structure various takaful products, ranging from general to family takaful, with features that resemble most of the features of conventional insurance. Nevertheless, the fact remains that not all conventional product features can be easily adopted and offered by takaful operators (TOs). This is evident in the absence of a Shariah-compliant model for retirement annuity plans with defined benefit features in the Malaysian takaful industry. This is despite its important features of providing security and peace of mind to the participants during their retirement years. The present study proposes the application of a hibah muallaqah (conditional gift) contract structured together with a wakalah (agency) contract for a Shariah-compliant retirement annuity plan. The study also identifies several potential Shariah issues and operational challenges entangling the proposed model. The study concludes with a set of policy recommendations.