UAE ranks 25th in the global pension indicators, says report

The report covers 44 global pension systems, equivalent to 65 per cent of the world's population

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A Staff Reporter

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Published: Wed 19 Oct 2022, 6:26 PM

A Mercer Institute report focused on measuring global pension indicators revealed that the UAE is ranked 25th in its annual study, which included 44 global pension systems – equivalent to 65 per cent of the world’s population. The report monitored relevant indicators regarding retirement income systems around the world, and highlighted several proposals that could contribute to providing more adequate and sustainable retirement benefits to the residents of these countries.

Hanan Al-Sahlawi, Executive Director of the Pensions Sector at the General Pension and Social Security Authority (GPSSA), said: "The UAE's 25th position according to the 14th annual Mercer CFA Institute Global Pension Index (MCGPI) report reflects the government's ongoing efforts to develop the pension system in the UAE, and reflects the distinguished performance shown by operating pension funds, whether at the organisational, operational or investment level.”

Al-Sahlawi said that the UAE occupied the 25th place globally due to the income system in place for pensioners, which is a significantly advanced rank in light of the UAE’s competition for pension funds. This is distinguished by experience and tradition, compared to the age of other funds in countries such as the United States of America, Singapore and France.

She pointed out that the report showed an improvement in the value of the overall index for the UAE from 59.6 in 2021 to 61.8 in the current year. The country umped in its classification from a C to a C+, and scored 63.8 degrees to rank 27th globally for its efficiency. This is yet another demonstration of the immense support provided by the UAE government for its nationals employed in both government and private sectors.

Individuals with insurance are charged only 5 per cent, and the country also supports employees working in the private sector with a 2.5 per cent contribution, aimed at encouraging Emiratis to work in the private sector. The value of government contributions during the past year for UAE nationals amounted to Dh87 million.

The minimum pension for those covered by the UAE Federal Pension Law increased from Dh6,000 in 2006 to Dh10,000 in 2012. The pension lasts for approximately 70 years or more, considering the high life expectancy in the UAE for both males and females, in addition to providing many other advantages enjoyed by those covered by the law.

In terms of financial sustainability, added Al Sahlawi, pension funds in the UAE have achieved high results. “This leap comes due to the continuous support provided by the government for those funds, in addition to the efficient investment policies put into place. In terms of the GPSSA, good investment policies contributed to enhancing its investment capital.

This was made possible through formulating an effective investment map that included numerous measures such as ensuring the independence of the investment sector and granting it [sufficient] powers to enable members to take sound strategic decisions that ensured competence, distribution and diversification of financial resources – as well as access to vital financial markets, investment in global portfolios, entry into emerging markets, and effective investment policies.

These are all steps that helped contribute to enhancing resources and providing higher investment rates.”

Since the obligations of the social insurance system varies between long-term and short-term, the UAE Pension Authority has worked towards maximising the profit resulting from managing GPSSA’s investment funds by diversifying investment operations.

This aims to ensure that the fund continues to give its beneficiaries the optimum services, taking into account sufficient guarantees to avoid potential risks in the market. This is to secure sufficient cash liquidity to meet immediate obligations towards those covered by the social insurance system.

The UAE was awarded a score of 51.9 in terms of integrity, ranking 25th globally. The UAE is considered one of the most important countries that occupy advanced ranks for its establishment of transparent systems in all its government institutions.

The country also does not tolerate any practices related to semi-corruption due to its stringent laws and regulations, supported by an auditing bureau that helps monitor all financial activities in the public sector. Additionally, the GPSSA is committed to abiding by and cooperating with the monitoring and auditing systems in place.

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