Golden Pension for expats in UAE: Many firms likely to adopt scheme, say experts

Analysts describe the fund as 'a positive step', suggesting it could even be made mandatory for employees


Muzaffar Rizvi

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Published: Wed 12 Oct 2022, 12:49 PM

Last updated: Thu 13 Oct 2022, 12:02 PM

Many companies in the UAE are likely to take part in the 'Golden Pension Scheme', which was announced by the National Bonds on Tuesday.

The initiative, they said, will help them retain top talent and human resources, besides providing financial security to its employees.

Analysts and financial experts described the pension plan as "a positive step" and suggested it could even be made mandatory for employees. They also recommended tax incentives that could encourage more firms to adopt the scheme.

"Employees prefer jobs that offer pension plans as this provides a great deal of financial security; this move is in the right direction and expected to instil more confidence in both the employees and the employers of the UAE," said Atik Munshi, managing partner at FinExpertiza UAE.

Experts said the golden pension scheme is just the beginning of "implementing a new concept in the region", and it will add more value to the employees' savings and financial plans linked with their retirement plans.

National Bonds, the UAE's leading Shariah-compliant savings and investment company, introduced the scheme wherein employees can contribute at least Dh100 per month and earn a profit on the amount saved. This can be availed in addition to the earned gratuity provided by their organisations.

"Undoubtedly, this is a positive step, and the progressive private companies are sure to participate in the scheme," Munshi told Khaleej Times.

"The minimum requirement level is also very low, so it would not be a burden on the pocket. One needs to keep in mind that this is a voluntary decision," he added.


Tax benefits could boost pension plan

Jitendra Gianchandani, chairman and managing partner of Jitendra Consulting Group, said more could be done to maximise the initiative's reach.

"To make the pension plan successful, the contribution to the gratuity could be made mandatory rather than voluntary saving," Gianchandani said, while referring to the example of India, where employers have to deduct the pension contribution from the employee's salary and deposit it in the bank.

"A pension scheme has become successful in tax countries because they give tax benefits to employees and employers to save and invest in the pension fund," Gianchandani told Khaleej Times on Wednesday.

What other countries do

Experts said introducing the pension scheme is just the beginning of a new era, and it would be improved with time. They said the UAE already enjoys good ranking on the pension index, and the evolution of more saving schemes will further boost its reputation in the coming years.

Munshi said many countries worldwide implement some form of pension plan, retirement scheme and provident fund,

"In some countries, government/state employees are treated differently compared to private sector employees in terms of pension plans. The city-state of Singapore, to which UAE is often compared, has different tiers of provident funds for its citizens and permanent residents."

"Under this regulation, private employers and employees — who are citizens or permanent residents — would contribute monthly as per the required threshold. The UK, too, has laid the onus on the private employers to make monthly contributions along with their employees with respect to the pension scheme," Munshi said.

Referring to Mercer’s Global Pension Index, he said Iceland and Netherlands hold the highest score of 84.7 and 84.6 in the year 2022 as far as pension plans are considered. They are followed by Denmark (82), Israel (79.8) and Australia (76.8).

"The UAE has scored a mid-ground at 61.8 points which is an improvement over 59.6 in the previous year," he said.

What is a pension scheme?

A pension plan or scheme is defined as an employee benefit that commits the employer to make regular contributions to a pool of money to fund payments made to eligible employees after they retire.

What are the benefits of a pension plan

There are many benefits of the pension plan, which include:

(a) regular source of income after retirement

(b) financial security

(c) tax savings

(d) monetary savings

(e) Source of inheritance fund for successors, etc.

How will it benefit employers?

From the employers' perspective, pension plans help the companies in attracting talent and retaining employees, and it also provides them with some tax benefits


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