Retirement planning feels overwhelming enough without adding religious considerations into the mix. Most Australians don’t even know where their super is invested, let alone whether those investments align with Islamic principles. The reality is, your default super fund is probably invested in things you wouldn’t touch if you knew about them—alcohol companies, gambling operations, conventional banks charging interest. A Shariah compliant Halal super fund changes that completely by screening investments through Islamic filters and using structures that avoid riba. You’re still building wealth for retirement, but you’re doing it in a way that doesn’t compromise your values or put you in ethically questionable territory.
What actually gets screened out and why it matters
Shariah-compliant super funds don’t just avoid the obvious stuff like alcohol and pork producers. The screening process goes deeper than most people realize. They exclude any company that makes more than 5% of revenue from haram activities, which catches businesses that might seem normal but have problematic side operations.
Financial companies get heavy scrutiny—if a company’s interest-bearing debt exceeds certain thresholds, it’s out. Same goes for companies holding too much interest-bearing cash or securities. This eliminates most conventional banks and insurance companies from the investment universe. Entertainment companies get examined closely too because many generate revenue from gambling, adult content, or other prohibited sources.
The screening happens at multiple levels. There’s a sector screen that removes entire industries, then a financial ratio screen that checks debt levels and interest exposure, and finally an individual business activity screen. Shariah advisory boards review companies regularly because businesses change what they do—a company that was compliant last year might not be this year.
How returns compare to conventional super funds
Here’s what everyone wants to know—am I sacrificing returns by going halal? The data shows it’s complicated. Some halal super funds have matched or beaten conventional fund averages over certain periods, others have underperformed. A lot depends on market conditions and what sectors are doing well at any given time.
Halal funds tend to be underweight in financials since most banks get screened out, which hurts performance when financial stocks boom but protects when they crash like in 2008. They often have higher exposure to technology, healthcare, and infrastructure because those sectors pass screening more easily.
The fee structure matters more than people think. Some halal super funds charge higher fees because they’re smaller and don’t benefit from economies of scale yet. A fund returning 8% with 1.5% fees leaves you with 6.5%, while a conventional fund returning 8.5% with 0.7% fees nets you 7.8%. Do the math on what that means over 30 years—it’s significant. Shop around for funds with reasonable fee structures.
The purification process that keeps everything halal
Even with strict screening, companies might earn tiny amounts from non-compliant sources. Maybe a tech company has some interest income from cash holdings, or a retailer has a small non-halal product line. Shariah boards calculate these “impure” earnings and require purification.
The super fund calculates your proportional share of these impure earnings and donates it to charity on your behalf. You don’t receive that portion as returns. This ensures your retirement savings stay completely clean even when perfect screening isn’t possible.
Different funds handle purification differently. Some do it automatically and include it in their reporting, others provide you with calculations so you can handle it yourself. Check how your fund manages this because it affects your actual returns and tax situation.
Estate planning considerations that nobody mentions
Super funds and inheritance get complicated in Islamic law. Australian super law says your super goes according to your binding nomination or trustee discretion, not automatic inheritance rules. Islamic inheritance law (faraid) has specific requirements about who gets what percentage.
Some Muslims try to structure their nominations to match Islamic inheritance ratios, but superannuation law might not allow that level of detail. You might need to nominate your estate and handle Islamic distribution through your will, though this creates potential tax disadvantages since super paid to estates can be taxed while super paid to dependents often isn’t.
Talk to advisors who understand both Australian super law and Islamic inheritance rules. Some halal super funds have staff who can guide you through these complications, though they can’t give legal advice. You might need both an Islamic scholar to clarify religious requirements and an estate planning lawyer to implement them within Australian law.
Switching funds without losing money or time
Moving your super to a halal fund isn’t complicated but there are things to watch for. Check if your current fund has exit fees—some older funds charge these though they’re less common now. Look at insurance coverage you might have through your current fund and whether you need to replace it.
The transfer itself takes a few weeks where your money’s in transit and not invested. In a rising market that costs you potential gains, in a falling market it accidentally protects you. You can’t time it perfectly, just know there’ll be a gap.
Consolidating multiple super accounts into your halal fund makes sense for most people—you reduce fees and paperwork. But check each account first for insurance or special benefits you’d lose. Some people keep their employer’s default fund active for insurance and shift everything else to halal super.
