What is the pension amount in the UAE, and what can expatriates anticipate?

In 2023, a study conducted by Our Life Plan portal revealed that the United Arab Emirates has emerged as the most favorable retirement destination. Additionally, the Emirates rank high in terms of state support for senior citizens. We will delve into the lifestyle of retirees in the UAE and explore the possibility of foreigners attaining similar status to citizens in an Arab country.

The regulations governing remuneration for expatriates of retirement age in the UAE are codified within the country's Labor Legislation and Federal Law No. 8, commonly known as UAE Labor Law. Nevertheless, it's crucial to note that the UAE does not provide a conventional state pension to foreign citizens. Instead, expatriates can access private payments that hinge on the contractual agreement they establish with their employer. In such instances, the responsibility for deductions lies with the employer. In accordance with the pension laws of the country, it is obligatory for the employer to enroll the employee with the GPSSA fund, which stands for the General Directorate for Pension Insurance and Social Security, within 10 days of the commencement of employment. The precise contributions to the fund, both from the employer and the employee, are contingent on the specific Emirate's regulations, as each Emirate has its unique conditions.

Since July 1, 2022, Dubai has initiated a pension savings fund tailored for foreign public sector employees, overseen by the Dubai International Financial Center. This fund empowers expatriates to receive disbursements upon reaching retirement age. The earnings from this pension program are contingent on the amount the employee invests and the investment portfolio they choose. All foreigners are automatically enrolled in this program, and their participation ceases upon termination of their employment. Meanwhile, the accumulated funds can be withdrawn immediately or continue to be invested.

Average pension size in the UAE  

According to BDEX statistics, the UAE ranks seventh globally in terms of pension amounts. In 2023, the average state benefits for citizens of the country stand at 123,920 rubles per month.

In contrast, in 2022, Emirati citizens received an average of 116,490 rubles. This signifies a year-on-year increase of 7,430 rubles in state assistance in the UAE.

Pension in the UAE:  

For UAE citizens  

The monthly pension for UAE citizens is determined by their years of service and contributions to GPSSA. If an individual has worked for over 15 years and made regular insurance contributions during this period, their monthly pension amounts to 60% of their salary. Furthermore, the state allowance increases by 2% for each year beyond the 15-year benchmark. Consequently, after accumulating 35 years of work experience, an Emirati citizen can expect a pension equivalent to their salary. In cases where the service tenure exceeds 35 years, additional allowances are granted.

Moreover, early retirement is an option for UAE citizens with 20 years of work experience, subject to a minimum age requirement of 49 for both men and women. The criteria for retirement are explicitly outlined in Article 16 of the UAE Federal Law.

For expats  

Foreign individuals who have maintained continuous employment in the UAE for a duration exceeding one year are eligible for severance payments. The specific disbursement procedures for these payments hinge on the type of contract agreed upon between the employer and the employee – either an urgent or indefinite contract. Additionally, employees who voluntarily resign can qualify for severance pay if they have served in their position for a minimum of 5 years.

Under a fixed-term contract:

• If the duration of service is less than one year, no allowance is provided. 
• If the duration of service is up to five years, the base salary is paid for 21 days for each year worked. For instance, if someone has worked in the company for four years, they will receive payment equivalent to 84 days of work. 
• If the duration of service exceeds five years, 30 days of pay are provided for the sixth and subsequent years.

Under an indefinite contract:

Under an indefinite contract, the severance pay calculations are determined by the side initiating the contract termination:

Employer's perspective:

• If the duration of service is less than one year, no allowance is paid. 
• For a service period of up to 3 years, one-third of the base salary is paid for each year worked, equating to seven days per year. 
• For a service period ranging from 3 to 5 years, two-thirds of the base salary is paid for each year worked, corresponding to fourteen days per year. 
• If the service period is exactly 5 years, the base salary is paid for 21 days for each year worked.
• If the service period exceeds 5 years, the base salary is paid for 30 days for each year worked.

Employee's perspective:

• If the duration of service is less than one year, no allowance is granted. 
• For a service period of up to 3 years, one-third of the base salary is paid for 21 days for each year worked.
• For a service period ranging from 3 to 5 years, two-thirds of the base salary is paid for 21 days for each year worked. 
• If the service period exceeds 5 years, the base salary is paid for 30 days for each year worked.

Elderly citizens' entitlements beyond payments  

Apart from receiving their pensions, elderly citizens in the UAE are entitled to various additional benefits provided by the authorities. These include:

• Pensioners may receive full or partial relief from utility bill payments. Additionally, they may receive vouchers and subsidies for resort visits. 
• Elderly citizens enjoy complimentary access to restaurants and concerts, as well as the opportunity to attend various training programs and courses. 
• All medical expenses, including psychological services, are covered for pensioners in the UAE.

Private pension programs  

Savings  

Given that nearly 90% of the UAE's population comprises expatriates, numerous banks offer specialized pension savings options. These programs are customized based on the depositor's income and age. For instance, Citi Bank in the UAE offers expatriates two distinct programs:

• A savings plan tailored to an individual's needs. 
• Coverage designed to provide financial security during retirement.

Major corporations, such as Emirates Airlines, have also introduced their pension initiatives. For instance, the airline offers a scheme in which the company contributes 12% of the salary, while employees contribute 5%.

Furthermore, the Dubai financial Corporation National Bonds introduced the Golden Pension Plan in the fall of 2022. This initiative primarily targets large private companies with a substantial foreign employee base. Under this program, employers can direct insurance pensions or monthly deposits into retirement savings, potentially combining them with voluntary contributions from employees.

Corporate Pension DEWS, known as DIFC Employee Workplace Savings, serves as a prime example of private pension insurance. Within this scheme, private enterprises operating within the Dubai International Financial Centre Free Economic Zone are obligated to make mandatory contributions to the general investment fund on behalf of their employees.

Under this program, a fixed rate structure applies:

• For employees with less than 5 years of tenure, the contribution is set at a minimum of 5.83% of their base salary.
• If an employee has completed more than 5 years of service, the rate increases to a minimum of 8.33% of their salary.

It's noteworthy that even during maternity leave, employers are required to continue making DEWS deductions, calculating these payments based on the employee's average salary.

Simultaneously, employees have the option to independently bolster their pension savings through various methods, such as:

• making regular payments with a fixed amount; 
• contributing a specific percentage of their salary;
• opting for a one-time payment.

However, there is a restriction in place: monthly deductions must not exceed the base salary.

Withdrawals from DEWS, which were contributed by the employer, can only be accessed after retirement or upon dismissal. If an employee voluntarily exits the program, they can withdraw their pension savings, which will be transferred to a personal bank account. Former employees also have the option to remain in the DEWS project and receive their pension benefits after turning 49. In the unfortunate event of an employee's passing, the savings are transferred to their rightful heirs.

Notably, partial withdrawals can be made from the funds that employees deposited independently, subject to the following conditions:

• withdrawals are limited to twice a year; 
• the amount withdrawn should not exceed 30% of the balance in the savings account.

Social benefits for various citizen categories  

In the United Arab Emirates, there exists a robust system of social support for its populace. Numerous government initiatives are in place, including:

Financial aid after childbirth

When a male child is born into a family, the government establishes a $50,000 account for him, while girls receive nearly $1,000 deposited into their accounts each month.

Interest-free property purchase loans:

Young families have the opportunity to acquire property in major cities through a 30-year interest-free loan. Notably, this loan is closed by the state following the birth of a third child.

The state provides monthly payments to certain groups of citizens, comprising:

• widows, divorced individuals, and women who have been abandoned;
• women married to foreigners who, due to circumstances beyond their control, are unable to earn a livelihood; 
• disabled individuals; 
• elderly and orphaned children;
• married or engaged students; 
• those in economic need.

Pension Visa and Its registration requirements  

In 2020, a new opportunity emerged for foreigners: the ability to apply for a pension visa in the United Arab Emirates, granting them legal residency even after concluding their careers. This visa is initially issued for a 5-year period, with the option for extensions. Comprehensive details about the Retire in Dubai program can be found on the program's official website.

Eligibility criteria:

• applicants must be aged 55 or older; 
• applicants should possess a work history of more than 15 years in the UAE.

Moreover, applicants must demonstrate one of three forms of financial independence:

• Ownership of real estate in the UAE valued at a minimum of $275,000. The property need not be a single unit.
• A bank deposit exceeding $275,000, maintained for a duration of at least 3 years.
• Proof of a monthly income derived from insurance payments amounting to $4,100 or more.

Importantly, the program's terms allow for a combination of financial sources; for instance, one can purchase an apartment worth $138,000 and also establish a deposit for an equivalent amount. The critical requirement is that the total income meets or exceeds $275,000.

Mandatory documentation for application:

• Documentary evidence of retirement status, such as a pension certificate or a certificate issued by the Pension Fund. 
• Passport copy.

Documents for confirmation of financial status  

If you're relying on income generated from real estate investments, you must provide a sales contract that includes details such as the property's value, owner's name, and location. It's important to note that, as per program regulations, property selection is limited to the Emirate of Dubai, and the property must be entirely paid for without relying on borrowed funds like mortgages or loans.

To start the process, a visit to the Dubai Land Department or DLD office is necessary, where you'll need to submit your application.

If you're using a bank deposit as evidence of your financial well-being, you'll need to obtain a letter from a UAE bank, composed in Arabic. This letter notifies the General Directorate for Residents and Foreigners (GDRFA) that you have indeed established a term deposit of $275,000 or more for a minimum duration of 3 years.

To apply for a visa based on this criterion, you should complete an application on the GDRFA website.

In case you're confirming your financial status through pension payments, you should furnish the GDRFA with a certificate obtained from the pension fund or your previous employer if they continue to disburse pension payments. This certificate should include essential details like the recipient's name, the pension initiation date, and the pension amount.

Conclusion  

If you want to own an apartment in Dubai or any other Emirate, we are here to turn your dream into reality. Our website showcases a wide range of luxurious and elite real estate from developers in the Arab world's premier country. Reach out to us via phone, and our experts will diligently curate the finest market options tailored to your preferences.