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pension fund in uae

Pension Fund in the UAE

There are different kinds of financial incentives offered to employees for their loyalty to the company. Two such incentives that an employee is entitled on retirement are Gratuity and Pensions. There is a difference between the two incentives; Gratuity pay is a lump sum amount offered to the employee on retirement. However, Pensions are continuous payment of a fixed sum to the employee for the services provided by him to the organization.

Pension for UAE Nationals

  • In the UAE, pension funds are only limited to the UAE nationals working in the government and private sectors. The UAE Federal Law No. 7 of 1999 for Pension and Social Security governs the law related to pensions provided to UAE nationals, both men and women.
  • The law also provides pension facilities to:
  • Emirati employers
  • Emirati that is self-employed
  • Citizens of the GCC countries.
  • The entitlement for the Pension commences from the next day of the termination of the employment contract and ends upon the death of the person provided he has no beneficiaries.
  • Article 16 of the UAE law, provides insured nationals entitlement for pensions.

Pension for UAE Expats

  • Studies have shown that approximately 90% of the workforce in the UAE are expats.
  • It is noted that gratuities and end of service benefits (EOSB) that are offered to employees are not sufficient to cover theirs after retirement expenses.
  • Surveys have shown that employees require to be provided with a savings fund that can benefit them after retirement.
  • The introduction of a pension scheme can help fund their retirement costs, such as healthcare expenses.

Government Speaks

  • Dubai International Financial Centre (DIFC) aims to replace the end of service benefit of gratuity with savings fund scheme by January 2020 that will aim to offer the retiring employees a choice of 12 passive investment funds that could help them in the future.
  • The DIFC has proposed a DIFC Employer Workplace Savings Scheme, to replace the on-going gratuity benefit. However, this ‘Savings Scheme’ is considered to be different from a pension fund as the funds accumulated under this scheme can be withdrawn by the employees either at the time of termination of the employment or anytime in the future after retirement.
  • For expat employees that do not work for the DIFC, the Department of Economic Development (DED) are working on a project that aims to offer a pension scheme to all expats working across the seven emirates.
  • Abdulrahman of the Federal Authority for Government Human Resources (FAHR) understands the need for such pension funds in the UAE for expats; he states that “… there are an excellent opportunity and an urgent need in the region to establish investment funds to manage retirement and end-of-service benefits.”

From the Law

  • Article 141 of the UAE Labour Law, enables the employer to maintain their pension scheme. If any company maintains a pension scheme for their employees, the employees that are entitled to the pension can choose either gratuity or the pension, whichever is a favorable scheme.

The government aims to improve financial conditions after retirement by 2020. There are various policies and program being developed in lines with a savings fund that can help the employees in the future. For more information about Pension funds in the UAE and dispute resolution related to labour and employment, it is best to approach a lawyer in UAE, that specializes in Labour and Employment.

Labour and Employment Lawyers in Dubai

It is often difficult to understand the Labour and Employment law in the UAE. It is helpful to approach a lawyer for any employment-related queries or disputes. HHS Lawyers and Legal consultants are providing specialists in Labour and Employment Law, that can help offer consultation regarding any queries or litigation lawyers for dispute resolution.

Hassan Humaid Al Suwaidi., LL.B. is a Senior Partner in HHS Lawyers. He has 20 years of experience dealing with high-value and complex cases. Frequently featured in local and international legal directories and commended for his ability to attain favorable outcomes for clients, Hassan has been involved in some of the largest legal settlements. A major part of his work is providing expert legal advice on UAE legislation and acting for individuals and businesses during disputes and litigation. Read more