Poor Pension Possibilities for Muslims: Uber's Unfolding

As reported on in our April Bulletin, legal action was brought recently by the Apps Drivers and Couriers Union (ADCU) against Uber in respect of its failure to provide Shariah-compliant pension arrangements to its workforce. The argument from the ADCU is that there is a breach of the Equality Act 2010 by Uber as a result of the lack of inclusion and access to suitable pension options. Pension's legislation also provides a statutory right for workers not to be subject to any detriment in pensions arrangements.

A significant proportion of UK Uber drivers are estimated to be Muslim, and yet these drivers have little choice when it comes to current pension arrangements. Many if not most pensions have investments that are not halal—that is, they are not permitted under Islamic principles. To elaborate, the investments of numerous pension funds involve haram activities (such as those comprising weapons, pork, alcohol and tobacco) as well as prohibited riba activities (namely investment that generates interest). Left with few Shariah-compliant options, what does this mean for the Muslim workforce?

A survey published by investment advisers Islamic Finance Guru in June last year (with a poll of 600 Muslims) found that over 30% did not have a pension. Given the Muslim population in the UK is in the millions and accounting for the average UK pension pot and those of whom are in work, this is a shortfall of billions of pounds of pensions[1].

Uber uses NOW Pensions, one of the UK's largest pension plans, to run its pension scheme which covers the UK workforce. However, NOW Pensions did not provide an investment fund option which was Shariah-compliant. The recent legal action has prompted Uber to make swift changes in response to action by the ADCU – note that this is the same union that brought the landmark Supreme Court case in respect of worker status of the drivers. NOW Pensions are working with Uber to create a Shariah-compliant fund, due to be launched soon.

The Pensions Regulator encourages workplace pensions to be relevant to the employees involved, which means that employers need to consider the particular needs of all their workforce when choosing a scheme. Fortunately, the vast majority of pension schemes do offer Shariah-compliant funds, so it would be difficult for trustees or employers to justify not making them available. Uber were correct in rectifying their error from a moral perspective but also from a legal one, as the risk of a discrimination claim (with respect to religion) is present as employers are obliged to comply with the Equality Act. It is the duties of trustees (and potentially also employers) to consider investment options available in schemes chosen and to ensure there is no discrimination present.

It is also worth bearing in mind, with the increase of Environmental Social Governance (ESG) strategies and moral consciousness in individuals seeking socially responsible investment, the likelihood of employees wishing to invest in Shariah-compliant pensions may increase (or demand for more options may surge in the alternative). There are already high-profile schemes moving billions of pounds into ESG funds, reflecting the demand for more sustainable investments[2].

[1] https://www.pensions-expert.com/Law-Regulation/Muslims-missing-out-on-pensions-worth-13bn-due-to-sharia-concerns?ct=true

[2] https://www.pwc.co.uk/services/human-resource-services/insights/esg-in-pensions-how-can-we-make-a-difference.html#:~:text=ESG%20factors%20are%20making%20their,financial%20benefits%20of%20early%20adoption.