Six in 10 UAE residents rely on their gratuity to fund their retirement

Analysts say the payment is inadequate to fund one's life after quitting work

Mixed race woman holding jar of change. Getty Images

Six in 10 UAE residents depend on their end of service gratuity payment to fund their retirement, a survey has found, highlighting the major role the benefit plays.

According to the study from financial services companies Old Mutual International and Quilter Cheviot, 59 per cent of those polled either partly or fully rely on the payment for their future plans. The survey polled 130 residents with over $50,000 invested in August last year.

Paul Evans, head of  Middle East and Africa region at Old Mutual International, said this “could be a cause for concern, as the research shows that on average they are relatively small payments”.

Nearly nine in 10 of those polled (84 per cent) say they will receive a gratuity when they leave their company, with 62 per cent stating the amount will exceed Dh20,000.


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At the Mena Pensions Conference in Bahrain in October last year, analysts discussed how the end of service gratuity – a defined benefit pension scheme – requires a rethink as it does not factor in the lifespan of an employee, only the years they have worked at a company.

Simon Herborn, senior consulting actuary at Milliman – Middle East and Africa told The National at the time that "the labour law gratuity is unlikely to be an adequate foundation" for a UAE resident's retirement.

Employees leaving an organisation in the UAE are entitled to an end of service gratuity after completing at least one year of service with the tenure calculated on the number of days worked. Those employed by a company between one and five years are paid 21 days of pay based on their final basic salary. After five years, they are entitled to 30 days of pay.

However, for many, this will not be enough to fund their retirement. Eight in 10 plan to continue working in retirement, either for social (45 per cent) or financial reasons (35 per cent) reasons, the study found. Eighty-one per cent said they expect to be self-employed.

Mark Leale, head of Quilter Cheviot’s Dubai representative office, said while self-employment can be a positive experience, it also "presents some challenges and anyone interested in taking on self-employed work to fund their retirement must have a financial plan in place".

This plan should take into account "the possibility that they physically could no longer be able to earn as they get older".

How to fund the retirement gap between the gratuity payment and the amount expatriates actually need has been a subject of debate in recent years. In the past, residents turned to financial advisory companies to top up their pension pots. However, many were mis-sold poor performing long-term savings and investment plans riddled with high fees and hidden charges.

A raft of new regulations proposed in 2017 by the UAE Insurance Authority and the Central Bank of the UAE to clamp down on mis-selling are yet to be imposed.


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The GCC’s gratuity system may evolve from a defined benefit scheme to a defined contribution scheme that places the onus on the individual to save for their future

Salmaan Jaffery, chief business development officer at Dubai International Financial Centre, told The National in October that such as plan will be in place for expats "in the near future".

When it comes to where residents want to retire, 62 per cent favour their home country, according to the study. While 18 per cent of respondents said they would retire in the Emirates, the poll was carried out a month before the UAE unveiled five-year retiree visas for expatriates over the age of 55.

Also, many residents expect to delay retirement. While a 2017 survey from Old Mutual and Quilter Cheviot found 43 per cent expected to retire between the age of 50 to 55, this dropped to 35 per cent in the 2018 poll.

Nearly half said they expect retirement to last between 11 and 20 years. However, with some living more than 40 years after the traditional retirement age of 60, independent personal finance communities such as and advocate a low-cost investment approach.

Steve Cronin, the founder of, said: "More and more people are becoming aware that low-cost, passive index-tracking ETFs are the best investment funds for residents."


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