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Pensions are the hardest common case in Zakat, because the money is yours but you may not be able to touch it yet. The treatment therefore turns on access:
Pensions are the hardest common case in Zakat, because the money is yours but you may not be able to touch it yet. The treatment therefore turns on access: what you can actually withdraw, and when.
The most widely applied approach is to pay Zakat on the portion of the pension you can access now, or on the value you could withdraw after tax and penalties, and to leave the locked portion alone until it becomes accessible. Some scholars instead charge Zakat on the full pot every year; others charge it only on contributions, or only when pension income is actually received in retirement. These are genuinely different positions, and the amounts they produce are very different, so this is a case where a qualified scholar's advice is not optional decoration — it decides the figure.
Contributions your employer has made but which have not yet vested — that is, which you would lose if you left the job — are generally not counted, because they are not yet truly yours. Once vested, they follow the same access test as your own contributions.
A state pension, where there is no pot of money in your name and payments begin only at retirement age, is generally not counted as wealth before payments start. Once you receive pension income, money you still hold from it on your Zakat date counts as ordinary cash.
All prices and rates in this example are illustrative, not live rates.
A man has a pension pot of $100,000. Of that, $40,000 is accessible now and $60,000 is locked until retirement. He also holds $10,000 in other wealth. Following the access approach, his zakatable total is $40,000 + $10,000 = $50,000, which is above the nisab, so his Zakat is 2.5% × $50,000 = $1,250. Under a full-pot approach, the same man would pay 2.5% × $110,000 = $2,750. The gap between those figures is exactly why the scholarly position must be settled first.
Almost everything about pension Zakat is a scholarly difference: full pot versus accessible portion, treatment of tax and early-withdrawal penalties, and the point at which a pension becomes wealth at all. Do not take a single online figure as settled law. Ask a qualified scholar, record the position you were given, and apply it consistently every year.