A pension scheme would balance employers’ budgets and provide for employees’ futures
Among the vital statistics revealed in the FNC finance and economy committee’s report issued this week were numbers that cut to an issue affecting every working person. In noting that federal spending for 2012 had blown out to Dh46.095 billion compared to the budgeted amount of Dh45.085bn, the report revealed that several government departments had vastly overspent on end-of-service bonuses for departing staff. In the case of the Ministry of Justice, the amount was a whopping 2,194 per cent of the budget provision. Given that no organisation, public or private, can be expected to know exactly how many employees will leave within a given year – especially in a country with a highly transient working population – it is clear that there must be a better way for employers to provide for this eventuality.
As The National has suggested before, the answer could be in a contributory pension scheme similar to the provident funds that operate in parts of Asia. Instead of simply paying a lump sum to employees when they leave, employers could set aside a small amount for each employee every month. The money would be quarantined, either through a private fund or a government body, and invested in a basket of financial products ranging from stocks to capital projects. Each staff member would have a share in the fund relative to their salary level, and they would have the option to make their own contributions so their slice of the pie is larger when they move on.
For expatriates, it would mean a payout similar to that already required by law, plus whatever interest the fund has accrued. It may even be possible for them to rollover their payout into a pension scheme in their home country. For Emiratis who are already entitled to a state pension, a contributory system would provide extra money for a more comfortable retirement. For employers, it would mean no more guesswork about how much to set aside for people who may resign. And if some of the funds were invested in infrastructure and other national projects, the entire country would benefit in a tangible way.