UAE considers offering expat pensions

If you’re heading for a hopefully long-term relocation in the UAE, you may be able to save for your retirement via a new expat pension scheme.

A recently issued report has recommended the UAE government should consider offering a savings investment fund to expat workers in the emirate. The report describes the scheme as a replacement for the usual end of service gratuity given in the Gulf States as well as in the Emirates, although as yet there are no exact details concerning employer contributions.

The traditional gratuity is made up of a calculated amount based on the completion of a year’s employment, but the new scheme is considered to be a major step in the right direction as well as an innovative experiment in the Gulf State region. The report, first publicised in Gulf News, states the scheme would be applicable to public sector workers as well as to expat professionals in the private sector, and should have a positive effect economically and socially on all contributors to the production cycle. It’s also mooted to stimulate the UAE’s national economy.

Proposals as to how the scheme will work explain employers of expats would deduct monthly sums for investment, with the lump sum and its accrued interest being paid back on completion of the contract. It’s expected the scheme would serve as a model for the participation of expat workers in investment decisions, with fund-managing firms running a fund made up of expat contributions plus employers’ voluntary monthly deductions.

However, expats shouldn’t throw their hats in the air right now, as there are many questions which need to be answered, including levels of employer contributions, at present the elephant in this room.
Also, the classifying of public sector and private sector employer contributions as ‘voluntary’ needs a straightforward explanation, as does another sentence claiming the scheme will ‘increase dues from employees and decrease employers’ expenses’.

According to one well-known London-based wealth management firm, the offer is an improvement on the current situation in which firms pay one months’ salary towards the end-of-contract gratuity. However, in the UAE, the allocated sum can be hidden in the balance sheet by calling it ‘profit’, and the gratuity is often paid in cash. Should the company go under, the employee’s so-called ‘pension’ could well disappear.