Golden pension for UAE expats: Who can get it, how it will increase gratuity

A pension scheme announced in the UAE earlier this week targets expatriates that make up 89 per cent of the country’s population, a top official has said. The Golden Pension Plan (GPP) will help employees of registered corporates with retirement planning.

Explaining how it works, Mohammed Qasim Al Ali, group chief executive officer, National Bonds, told Khaleej Times: “Companies can contribute a lump sum or monthly contributions either from or on behalf of their employees such as end-of-service etc. The contributions will be placed in GPP as per the agreed terms and features, where applicable expected profit and/or reward prizes will be provided to the company or directly to their employees as per the company’s choice. National Bonds will manage the fund by investing in various low- to medium-risk sharia-compliant asset classes. These areas are pre-decided with the corporate during the process of signing up.”

Sukuks (savings bonds) will be issued under the employees’ accounts with National Bonds as per the allocation provided by the company of the contributed funds. The sukuk issued under the product will be locked for redemption and can only be initiated based on the company’s request.

“The employee will have the visibility of the invested amount, but redemption of the winnings and profit will be based on company’s request only,” the official added.

Additionally, employers will be able to redeem part of the gratuity back to their employees with their prior approval.

Who can sign up?

According to Al Ali, for now, expats who are employees of corporates that have signed up with National Bonds can be part of the scheme.

“Each month, they have the flexibility to save as little as Dh100 and have the opportunity to earn a profit on the amount saved. This cumulative amount saved can be availed in addition to the earned gratuity provided by their organisation.”

In the UAE, every company is mandated to provide gratuity to their employees.

“By enrolling to the GPP, they will be funding it, which gives more security to the employees. In addition, they will boost the gratuity amount through the return on investment.”

How are profits paid?

National Bonds offers “highly competitive returns” on investments in the region and beyond.

“The profits on the GPP will be paid quarterly and the profit allocation and disbursement dates will be fixed based on the first investment received from the company,” said Al Ali.

When asked if beneficiaries can request the accumulated amount in times of emergencies, the official said redemption control of the GPP lies with the company.

Employees could win a Dh1 million grand prize every quarter

The National Bonds runs a Dh35 million rewards programme. It offers a grand prize of Dh1 million for two winners each every three months. It also offers over Dh423,000 worth prizes each year, with dedicated prizes for ladies, minors and regular savers.

Under the GPP program, registered employees will be eligible for all the prizes of the rewards programme “without any minimum balance requirement with double the chances per sukuk”. “The chances multiply and reach up to four times as you continue to save,” said Al Ali.

Simple scheme

According to the official, the company’s research suggested that a “large segment” of the working population looks for a “much simpler pension offering vs. what asset management or insurance companies are offering”.

“GPP allows companies to provide financial care and benefits to its employees and in a convenient and simplistic approach.”

Other savings programmes

Since the GPP is restricted to employees of corporates registered with the National Bonds, staff of other firms can opt for a ‘Global Savings Club’. The plan encourages employees to build their own emergency funds via voluntary monthly bank deductions. Like the GPP, the monthly contribution starts from Dh100.

“The club has managed to attract a sizeable contribution from these employees who opted to build their own safety net on top of their gratuity entitlements,” said Al Ali.

Do expats depend too much on their gratuity?

“Theoretically yes, but it's quite liquid and employers normally don’t give the option to redeem from their end of service dues,” said the official. “Therefore, we strongly advise employees to have a parallel disciplined savings plan which is liquid enough in case of emergencies. We strongly urge people to invest in educating themselves, leveraging the opportunities available and planning for their future before it's too late.”

He highlighted how the Covid-19 pandemic affected company’s performance. “This is a good learning event that should re-prioritise our goals in life. Given the fast pace of our lives these days, retirement planning often sits on the backburner. However, it’s a crucial element when we speak about financial planning.”

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