The government of the UAE has put in a Golden Pension Scheme for expats and in this article, I want to go over what it is, how it affects expats, and how it compares to pension schemes in the UK.
If you have any questions, please email me at info@investmentsforexpats.com
The UAE (United Arab Emirates)
The UAE has shown to be progressive in its forward-thinking for the development of the nation for expats to come and stay. It has unrivaled unemployment insurance for expats in 2021. This pension plan is another plus for the country by giving employees a similar pension scheme that is available around the world and employers the ability to contribute to attracting more talent.
Although the UAE has other programs for retirement in the UAE, such as the DIFC Employee Workplace Savings (Dews) plan in February 2020, it became the first entity in the UAE to overhaul the gratuity system.
In the free zone, employers are required to make a monthly contribution to a trust-run fund equal to either 5.83 percent or 8.33 percent of an employee’s salary, depending on the employee’s length of service. Additionally, employees have the option to make additional voluntary Dews plan contributions.
This gives a new pension plan that seems to be attracting employers with 9000 signed up so far.
What is the Golden Pension Scheme for Expats in UAE?
Companies can register with the national bond then the company can forward to the staff that is making the investment.
The benefits of the UAE Golden Visa Scheme are that participants can withdraw their contributions from the fund whenever they want and can contribute as little as 100 Dirhams per month.
Participants will have a range of funds to opt-in and will be able to view the savings in real-time. Assets include sukuks and bank deposits and will be predominately medium to low risk.
What are the benefits of the Golden Pension Scheme for Expats in UAE?
The main benefit is that this is a government saving plan that is overseen by the UAE, therefore, it has regulation.
Additionally, all foreign workers that work for at least a year are entitled to a defined end-of-service gratuity called gratuity after serving one year. This has enabled workers to cut out the pricy insurance policies and saving plans that have been “sold” to UAE residents that normally have acted as “pension plans” for many years. These often have little liquidity and are highly costly, around normally 2-3% a year, and complex to understand.
Do employees have any say in how their gratuities are invested?
Yes, they do have a say on where the investments are made in the perimeter of pension plan portfolios with the theme of low/medium risk.
It can be tracked via the link on the national bonds website:
Furthermore, when the employer permits, participants can take their pension savings from the end-of-service account and their individual contributions are always refundable.
Conclusion
Personally, I think this is a good plan for expats in the UAE region because it offers more of an incentive to work and stay in the UAE, however, it will also cut down on a lot of the mis-sold pensions and investments some expats have received from a select set of advisors.
As always, if you have any questions, please email me at info@investmentsforexpats.com
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