Uber threatened with legal action over lack of sharia-compliant pension

Uber’s UK pension provider is to redraw its new workforce scheme within months of its launch after a union complained the lack of a sharia-compliant investment option effectively excluded much of the ride-hailing app’s Muslim-majority workforce.

Auto-enrolment in a workplace pension scheme was one of the main practical benefits to drivers of Uber’s decision last year to reclassify them as workers, following a landmark ruling by the UK’s Supreme Court. It means drivers earning more than £10,000 a year receive contributions to their retirement fund worth 8 per cent of pensionable salary, with 3 per cent paid by their employer, and 5 per cent by the worker.

The UK pension scheme was a world first for Uber, which has since urged other ride-hailing services to offer similar benefits to their drivers. But despite claiming to set new standards for workers in the gig economy, Uber has been prompted to make changes by the threat of legal action from the App Drivers & Couriers Union, the same antagonist that brought the Supreme Court case.

Last September, Uber selected NOW Pensions, the UK’s third-largest pension plan, to run its new retirement scheme, covering the company’s UK workforce of around 70,000. Uber also agreed to make back payments dated from May 2017, or the date of a driver’s first trip for those who had joined since that date.

Unlike most workplace pension plans NOW Pensions only offers one investment fund to its millions of auto-enrolled members, which was not sharia-compliant. This meant drivers who did not want to lose their employer contribution had to stay put in the non-sharia fund.

The ADCU said on Tuesday the omission of a sharia option — avoiding investment in areas such as tobacco, armaments, pork and certain financial services — “effectively makes the pension scheme inaccessible for the vast majority of the workforce”. Its legal representatives wrote to Uber seeking more information and threatening legal action if there was no response.

As news of the legal action became public on Tuesday, NOW Pensions said it would be launching a sharia-compliant fund this year as members had been inquiring about the option. Uber confirmed it was working with NOW Pensions to make a sharia-compliant fund available to its drivers, and expected it to be available this summer.

“We don’t currently have a sharia-compliant fund but we are always keen to respond to member views,” said Adrian Boulding, director of policy with NOW Pensions. “We are looking to launch this option for our members later this spring.”

Uber said: “The vast majority of drivers participate in our current pension scheme and we are working with NOW Pensions as they create a sharia-compliant fund which will be available to drivers soon.”

The ADCU said it had first contacted Uber about the issue in December and that several drivers had contacted the company separately through the app to ask if a sharia-compliant option was available, without receiving a satisfactory response.

Abdurzak Hadi, the ADCU’s London chair, said he had spoken to many drivers who had opted out of the pension scheme as a result, while others — like himself — had remained in it but planned to withdraw unless their ethical concerns were resolved.

The issue had made it harder to persuade drivers who were making pension contributions for the first time that it was in their interests to be enrolled in the scheme, Hadi said, adding that he was “trying to convince them a pension is something good for their future”. 

A spokesperson for The Pensions Regulator said: “We’re determined to build a workplace pensions system that works for everyone. That’s why we encourage employers to consider the particular needs of all their workforce when choosing a pension scheme and there are many available that offer sharia pension funds as an option.”