UAE long-stay expats to get defined contribution pensions

Published:  27 Nov at 6 PM
Want to get involved? Become a Featured Expat and take our interview.
Become a Local Expert and contribute articles.
Get in touch today!

The UAE’s end of service benefit is a useful and welcome lump-sum bonus for expats who’ve worked in the emirates for a while, but is it enough?

Expats in the UAE are entitled to this gratuity once they’ve worked for a company for one year, and those working in the same job for more than five years receive an amount increased to 21 days’ pay based on the final salary. Thus, the amount received depends on the actual duration of employment. In contrast, emirati employees leaving their jobs are paid in a different manner as they’re part of a defined benefit scheme which pays out a percentage of the final salary for the recipient’s remaining years of life.

As a result, the expat gratuity scheme has been widely criticised for not taking into account the problems caused when expats retire to their home countries with gaps in their social security payments. Most expats don’t consider this a problem until retirement kicks in and they realise they won’t get the pension payments they need to live a comfortable life, whilst their former emirati workmates are well provided for by the state. It’s even worse for expats who don’t return home at retirement as they’re quite happy to stay with the lifestyle they’ve created for themselves overseas. The UAE is an expensive place and is affordable with the average expat professional’s salary and perks, but living on a much decreased sum in retirement isn’t any fun.

Providers believe the expat-aimed gratuity scheme is in need of a massive overhaul in order to allow those expats making the emirate their permanent home to receive enough in retirement to make ends meet. It’s also important to ensure companies who are a part of the defined benefit scheme set aside enough money to make payments when they fall due. A recent U-Gov poll taken by 1,000 expats in full-time employment in the UAE showed some 80 per cent of respondents believe the gratuity isn’t enough to cover all retirement expenses, with 78 per cent believing their employers should do more in the way of encouraging and helping them prepare for their financial needs in retirement. As a result, Dubai is expected to go ahead with a defined contribution plan for expats, including a transitional period moving workers away from the present-day defined benefit plan.
Like this news?

Comments » No published comments just yet for this article...

Feel free to have your say on this item. Go on... be the first!

Tell us Your Thoughts On This Piece:

Your Name *
Email * (not published, needs verification one time only)
Website
Type:
  • Facebook
  • Follow us on Twitter
  • RSS feed
  • Facebook

Latest Headlines

News Links

News Archive