Origin Of Pension System

Once Umar Radhiyallahu Anhu (the 2nd caliph) was passing through the door of a house, where a beggar was saying: ” I am old, blind and can not see”.

`Umar (Radhiyallahu Anhu) tapped him from behind and asked, “Are you a Jew or a Christian?”

He said: “A Jew.”

`Umar said: What made you to do this i.e. begging and made you weak.

He said: I have to pay tax, I am needy and due to my age”

`Umar took his hand and brought him home, gave him few things, and directed the supervisor of Bait al-Maal (state treasury) and ordered, “Take care of him and the likes of him. By Allah this is not justice that we enjoy the fruits of their labor when they are young, and should be neglectful when they are old.”

As the verse states: “Obligatory charity expenditures are only for the poor and for the needy ” [at-Tauba verse 60], …. this man is among the needy from people of the book. Thereafter the man and the likes of him were exempted from paying security tax (across the entire islamic caliphate)

Abu Bakrah said: I am witness of this from Umar and i saw that old Man.

[Ref: ﻛﺘﺎﺏ ﺍﻟﺨﺮﺍﺝ page 150 by Imam Abu Yusuf student of Imam Abi Hanifah rahimahullah]

The Bait al Maal (State Treasury)

During the time of the Prophet Muhammad صَلَّى اللَّهُ عَلَيْهِ وَسَلَّمَم and His Companions, the  Bayt al Maal was initially for the purpose to administer the wealth of the state which was acquired through war, where Islam and Muslims  life were concentrated in Makkah and Madinah. This is not only the  source of Bayt al Maal. There are Zakaat, abscess, tribute, booty, loyalty,  and endowments. Its existence was hence not quite noticeable due to the life which was not quite complex at that time. The acquired
property including zakat collection was immediately distributed 
without any delay.

The Bait al-Maal was formally established during the second Caliph, Umar al-Khattab رضي الله عنه  and it functions was to be in golden era during the period of Umar Abdul ‘Aziz, where the good practice of management and governance exercised lead to stability of the society in that era.