UAE expat pension will be ‘stand-alone entity’
From Retirement Nov 1 2011 BY: Will Jackson
, Contributing editor
, International Adviser
The proposed pension scheme for expatriates who work in the United Arab Emirates (UAE) will not be subsidised or guaranteed at a government level, according to Harun Kapetanovic, an economic adviser at the Dubai Department of Economic Development.
Speaking at a debate hosted by Insight Discovery in September, Kapetanovic emphasised that the scheme should instead be “commercially-viable” and “self-sustainable”. “It should be a stand-alone entity, able to cover its costs at least and provide a service to the economy,” he said.
While Kapetanovic did not envisage such a scheme competing with asset managers or existing corporate retirement plans operating in the region, he added, it should have economies of scale that others would not be able to match, thereby creating an attractive value proposition.
Key objectives
With expatriates forming a large proportion of the UAE population, the idea of creating an expat retirement saving scheme is not a new one. However, the Insight debate revealed that the Dubai Government has already started consulting public and private sector employers on the issue.
Kapetanovic said the proposed scheme had three key objectives. First was the promotion of economic growth in the region, driven by the beneficial effects of long-term pension investing on the development of the fund management industry and capital markets.
Second was the scheme’s ability to attract more foreign workers to the UAE, and third was the enhancement of the welfare of expats: “to provide the opportunity and mechanisms that will allow them to plan their future in a more efficient way and protect their rights more effectively.”
The scheme is likely to build on the existing end of service benefits (EOSB) system which provides workers with a payment on termination of employment, Kapetanovic explained, and the Government envisages employer contributions of about 8% of basic salary.
The new pension will cover “blue and white collar [workers] alike”, and will be transferable between employers across the UAE, he added.