UAE’s New Path vs. Global Systems: The UAE’s recent pension reform marks a shift from the traditional end-of-service gratuity to a funded, investment-based scheme
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This mirrors global trends where defined contribution (DC) plans have become the norm. For example, in the UK, automatic enrollment requires employers to contribute at least 3% and employees ~5% of earnings to workplace pensions
Australia mandates employer contributions of over 11% of salary into superannuation funds
Singapore’s Central Provident Fund goes as high as 37% combined contributions (17% employer, 20% employee)
By comparison, the UAE’s scheme asks employers to contribute 5.83% of basic salary (8.33% beyond five years’ service)
While the UAE’s rates align with its gratuity formula, they are on the lower end globally. However, employees can make additional voluntary contributions up to 25% of salary
moving closer to global best practices of shared saving responsibility.
Voluntary vs. Mandatory Participation: A key difference is that the UAE’s federal scheme is currently voluntary for private employers
Many leading pension systems use mandatory or auto-enrollment models to ensure broad coverage (the UK’s policy increased active pension membership from under 1 million to over 10 million by 2019)
We may see the UAE encourage wider adoption as the framework matures, especially as it pursues its 2031 vision to rank among the top countries in human development
Notably, within the UAE, the Dubai International Financial Centre (DIFC) already replaced gratuity with a mandatory DC plan in 2020, setting a local precedent similar to global standards. The federal reform builds on such models to extend modern retirement benefits to the broader workforce.
Pension assets as a percentage of GDP vary widely by country, reflecting decades of contributions. UAE’s move to funded pensions is a step toward building long-term retirement assets in line with global practices.
Investment Options and Portability: Global best practices emphasize giving employees control over investments and ensuring portability of benefits. The UAE scheme offers a range of investment funds, including Shariah-compliant options and even capital-protected portfolios for low-risk needs
This diversity parallels offerings in mature systems (e.g. U.S. 401(k) plans let employees choose funds ranging from index portfolios to target-date funds). Moreover, the UAE scheme safeguards vested benefits: upon termination, employees receive all contributions plus investment returns within 14 days
They even have the option to keep the funds invested in the scheme for continued growth
This flexibility echoes global norms of preserving retirement savings when changing jobs, rather than forcing a cash-out. While full portability between employers in the UAE will depend on how many companies adopt the scheme, the framework allows an employee to carry on investing independently if they wish, much like transferring a pension pot when switching jobs in other countries.
Governance and Security: Best-in-class pension systems have strong regulatory oversight and protections against mismanagement. The UAE’s scheme is overseen jointly by the Ministry of Human Resources and Emiratisation (MOHRE) and the Securities and Commodities Authority (SCA)
Employers must choose licensed fund providers, ensuring professional management under regulatory standards
This governance structure is comparable to, say, the role of trust law and regulators in the UK or the ERISA standards in the U.S., which safeguard pension assets. Additionally, the UAE scheme explicitly aims to protect employees from inflation and employer insolvency
– a critical improvement over the old gratuity system. By moving funds into independent investment vehicles, employees are better protected if a company faces bankruptcy, aligning with the security that funded plans offer in other jurisdictions.
How HAYAH Aligns with Global Trends: HAYAH’s offerings have been crafted to meet these international standards head-on. As a leading UAE insurer with a dedicated Your Employee Saver (YES) pension platform, HAYAH provides a fully digital, defined contribution experience similar to platforms in advanced markets
Plan members can monitor their balances, adjust contributions, and choose from personalized investment options that match their risk appetite
just as they would in a 401(k) or an auto-enrolled pension scheme. Importantly, HAYAH’s range of funds includes sustainable and Shariah-compliant choices, reflecting global moves toward socially responsible investing (more on ESG in a later section).
In global systems, it’s common to bundle retirement plans with insurance benefits (for example, many corporate pension plans include life or disability coverage so that if an employee dies or becomes disabled, there are benefits for their family). HAYAH follows this holistic approach by integrating life and disability insurance offerings alongside the pension scheme. This means employees not only build a retirement nest egg, but they also have financial protection against life’s uncertainties – a practice seen in the best corporate benefit plans worldwide. For instance, HAYAH can provide group life insurance that ensures an employee’s family receives a payout (separate from the pension account) if the worst happens. Such integration of insurance with pensions is a hallmark of comprehensive benefit planning in leading economies.
Staying Competitive in Talent Acquisition: Ultimately, aligning with global best practices isn’t just for show – it has tangible benefits for UAE businesses and the economy. Multinational companies and skilled professionals often evaluate retirement benefits when considering where to invest or work. By offering a modern, portable pension scheme administered by experienced providers like HAYAH, the UAE enhances its appeal as a competitive employment market
HAYAH’s domain experience (heritage as AXA Green Crescent and now a locally listed insurer) brings international know-how with local customization. This ensures that UAE employers can offer benefits on par with those in New York, London, or Singapore, without losing the local relevance (such as Shariah fund options for culturally appropriate investing). In short, the UAE’s pension reforms are catching up with global standards, and HAYAH’s comprehensive, tech-driven solution is helping employers and employees leapfrog into this new era confidently.
Sources:
1. Kidbrooke Insights – UAE Gratuity Reform offers investment-based alternatives with safeguards
2. House of Commons Library (UK) – Auto-enrolment achieved 10x growth in pension membership by 2019
3. BrioHR – Singapore CPF contributions total 37% of wages (17% employer, 20% employee)
4. UAE Official Gazette – UAE Cabinet Resolution 96 of 2023: Employer contributions 5.83% (<5yr) & 8.33% (>5yr)
5. UAE Government Portal – Alternative Savings Scheme allows various investment options and protects against inflation and bankruptcy
6. Ministry of HR (UAE) – Scheme overseen by MOHRE & SCA; providers must be licensed
7. Additiv Press Release – New regulations enable alternative EoSB schemes, aligning with UAE’s 2031 HDI vision
8. International Adviser – HAYAH’s SCA license and digital pension platform (YES) ensure top-tier, compliant pension solutions