UAE’s pension system ranked 25th globally

Mercer index benchmarks retirement income systems of 44 countries

The UAE pension system has performed well in the areas of adequacy, sustainability and integrity, according to Mercer. Getty
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The UAE’s retirement income system improved in the Mercer CFA Institute Global Pension Index, which ranked it 25th among 44 countries with long-standing pension systems such as the US, Singapore and France.

The overall ranking reflects the “sound structure” the country has put in place for a funded pension system for Emiratis, with both the public and private sectors setting aside mandatory contributions during an employee’s tenure, according to the survey which includes the UAE for a second consecutive year.

The UAE's ranking also accounts for the progress being made to put in place a new retirement savings programme to support private sector employers and foreign employees as they plan for their financial future.

Globally, Iceland took the top spot, followed by the Netherlands and Denmark, while Thailand was ranked last, according to the index.

The index is a study of global pension systems that account for 65 per cent of the world’s population. It benchmarks retirement income systems around the world.

The UAE pension system scored highly, compared with global peers, in the areas of adequacy, sustainability and integrity, Mercer said on Tuesday.

“Included in the index for the second year, the UAE has fared better than a number of more established global peers,” said Robert Ansari, Mercer’s head of investment and retirement for India, the Middle East, Turkey and Africa.

“Like many of its peers, the UAE is preparing for an increased population size entering retirement, necessitating a well-run and adequately provisioned pension scheme.”

Within the UAE, the pensions of Emiratis are administered by different agencies such as the Abu Dhabi Pension Fund, the Sharjah Social Security Fund and the General Pensions and Social Security Authority (GPSSA).

While Abu Dhabi has its own pension scheme, the GPSSA is the federal body that administers pensions for the rest of the Emirates.

Emiratis working in government and private sectors are eligible for pensions and other retirement benefits after reaching the retirement age of 49 or after having served a minimum of 20 years, according to the UAE government.

Under the programme, if an employee contributes 5 per cent of their monthly salary, then a government employer contributes 15 per cent.

For the private sector, employers contribute 12.5 per cent, which is topped up with a further 2.5 per cent by the government.

Non-Emirati employees have their end-of-service entitlements covered by the UAE’s gratuity programme.

Gratuities are lump-sum payments to which all employed residents are entitled after completing at least one year of service. They are covered by the UAE labour law and the sum depends on an employee’s length of service and basic salary.

As the country continues to improve its efforts to attract and retain talent, Dubai recently launched a savings retirement initiative for non-Emirati employees working in the emirate’s government and public sector.

Foreign employees working in Dubai’s public sector will be enrolled in the savings programme by default and employers will contribute the total gratuity to the plan from the date of joining, without including the financial dues for previous years of service.

The Dubai International Financial Centre was the first body in the UAE to overhaul the gratuity system when it introduced the DIFC Employee Workplace Savings (Dews) plan in February 2020.

The initiative allows participants to choose a plan in line with the type of investment risk they are willing to take.

National Bonds, the Sharia-compliant savings and investment company owned by the Investment Corporation of Dubai, unveiled a Golden Pension initiative last week to help private-sector foreign employeeswith their financial planning.

Under the National Bonds pension scheme, the employer has the choice to either invest the entire end-of-service benefits accumulated over the years as a lump sum or invest a portion, while employees have the flexibility to contribute as little as Dh100 ($27.22) a month.

The amount will be invested in money markets, sukuk and National Bonds’ property portfolio.


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The UAE had an overall index score of 61.8 in Mercer’s Global Pension Index. The index uses a weighted average of the sub-indexes of adequacy, sustainability and integrity.

The country scored 63.8 in adequacy due to the generous retirement benefits, which ensure a continued income to sustain a good quality of life with a suitable minimum pension relative to earnings, according to Mercer.

It scored 51.9 in sustainability, driven by the high labour force participation rate, especially for people above the age of 55.

The country had the highest score, 72.6, in integrity, owing to the strong governance structure around the pension system, it said.

Globally, Iceland had the highest overall index value at 84.7, followed by the Netherlands at 84.6 and Denmark at 82. Thailand had the lowest index value of 41.7, according to Mercer.

For each sub-index, the pension systems with the highest values were Iceland, in terms of adequacy (85.8) and sustainability (83.8), and Finland, in terms of integrity (93.3).

The UAE is preparing for an increased population size entering retirement, necessitating a well-run and adequately provisioned pension scheme.
Robert Ansari, head of investment and retirement for India, the Middle East, Turkey and Africa, Mercer

In comparison with 2021, Mexico showed the biggest improvement because of pension reforms, Mercer said.

“The rapidly changing economic environment has challenged all the norms and tools we use for planning a sound and secure financial future,” said Ziad Zein, president of CFA Society Emirates.

Areas of improvement in the UAE’s pension system include the introduction of a minimum access age to a person’s retirement benefit and the raising of the state pension age in response to the country’s life expectancy, Mercer said.

Increasing investment towards educating and promoting a savings culture in the UAE among citizens will also help to address the lack of planning for a life of retirement, it said.

Updated: October 18, 2022, 10:28 AM