Monthly pension contributions for Emirati employees who joined the workforce from October 31 this year have been increased to 26 per cent, from 20 per cent previously, the General Pension and Social Security Authority (GPSSA) said on Wednesday.
The increase in retirement contributions for new Emirati employees comes after the GPSSA announced a new Federal Decree Law, No 57 on Pension and Social Security, on November 17.
The new law aims to “benefit from an Emirati’s experience for the longest period of time in order to serve public interest and reconsider calculating the retirement pension, so that its value increases as the employment years increase”, Hind Al Suwaidi, acting executive director of the GPSSA's pensions sector benefits management department, said during a forum in Dubai to raise employer awareness of the legislation.
Under the law, employee monthly contributions for new Emirati workers in the public and private sectors have been increased from 5 per cent to 11 per cent.
Public sector employer contributions remain at 15 per cent but for private sector employers, it has been increased from 12.5 per cent to 15 per cent, the GPSSA said.
For Emiratis working in the private sector, whose contribution account salaries are less than Dh20,000 ($5,445), a rate of 2.5 per cent is paid by the UAE government to support and encourage Emiratis to work in the private sector.
“It is worth noting that the percentage of contributions paid according to the contribution account salary is a maximum of Dh100,000 for government sector employees and Dh70,000 for private sector employees, given that the contribution account salary of the employee working in the private sector is not less than Dh3,000,” Ms Al Suwaidi said.
Current employees will continue to be covered by the provisions of Federal Law No 7 of 1999 on Pension and Social Security, the GPSSA said.
The pensions of Emiratis are administered by three agencies: the Abu Dhabi Pension Fund, which oversees public and private Emirati employees in Abu Dhabi; the Sharjah Social Security Fund; and the GPSSA, the federal body that administers pensions for the rest of the Emirates.
In October, the UAE’s retirement income system improved in the Mercer CFA Institute Global Pension Index, which ranked it 23rd among 47 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 the public and private sectors setting aside mandatory contributions during an employee’s tenure, the survey said.
The new law covers ministers and, for the first time, Emiratis who work in UAE-based embassies, as well as regional, international and political missions, Ms Al Suwaidi said.
It will also provide a social insurance system that enables women to carry out their familial obligations by offering preferential pension conditions, such as a reduction in employment years.
“[The law] reconsiders pension entitlement conditions such as the retirement age and years of employment in alignment with the UAE’s increased life expectancy,” Ms Al Suwaidi said.
“It will link pension to inflation in order to reconsider terms and conditions in view of the rising cost of living.”
The UAE’s retirement income system comprises a minimum means-tested state pension and an earnings-related national employment-based scheme.
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.
Watch: UAE launches new gratuity scheme
Foreign employees have their end-of-service entitlements covered by the UAE’s gratuity programme, as well as the Voluntary Alternative End-of-Service Benefits Savings Scheme, which was announced by the UAE government in September.
In November, the Abu Dhabi Pension Fund amended its retirement law and added new features to ensure equal access to benefits for Emiratis working in the public and private sectors in the emirate.
A key amendment to the law raised the pensionable amount to 100 per cent of a deductible salary once employees complete the maximum years of service.
Previously, the pensionable amount was capped at 80 per cent of the deductible salary.