UAE: New Pension Law Approved

United Arab Emirates News developments

UAE: New Pension Law Approved

Gulf News (United Arab Emirates), 17 November 2023: The UAE’s General Pension and Social Security Authority has announced it has approved a new Pension and Social Security Law.

Under Federal Decree Law No. 57/2023, the maximum contribution account salary for Emiratis working in the private sector has been increased from 50,000 to 70,000 AED.

It will apply to Emirati employees who have joined the labour market for the first time.

This will be case from the date of its publication in organisations participating in schemes run by the Authority.

Existing participants will continue to be covered by Federal Law No. 7/1999 on Pension and Social Security.

A pensioner who receives a pension in line with Federal Law No. 7/1999 or any other previous law will also continue to be covered by the existing law.

An insured individual who has received an end-of-service bonus in line with Federal Law No. 7/1999 or any previous law, will continue to be covered by Federal Law No. 7/1999, even if they started a new job after Federal Decree Law No. 57/2023 was issued.

Under the Law, an insured employee is authorised to consolidate previous periods of service, for any employer covered by the Law to their total pension. The insured individual can also consolidate the period of service before acquiring UAE nationality. The periods of prior service in any entity approved by the UAE Cabinet will be suggested by the Authority’s Board of Directors.

The minimum age for the insured individual to be entitled to a retirement pension is 55.

The minimum subscription period is 30 years.

The new Law grants working mothers’ more flexibility and benefits. It states that working mothers can apply for a retirement pension entitlement when they are younger and can benefit from a shorter subscription period as well.

They can also maintain their optional subscription if they have chosen to take leave to care for their children, in line with the terms and conditions. The new Law authorises the insurer to benefit from optional subscription where they requested unpaid leave to pursue postgraduate study.

The monthly subscription salary for the public sector consists of the basic monthly salary of the insured individual, in addition to the monthly allowances. This includes the cost-of-living allowance, the social allowance for children, the social allowance for UAE nationals, and the housing allowance, provided that the value of the insured individual’s contribution account salary does not exceed 100,000 AED.

However, in the private sector, the contribution account salary is specified by the employment contract. The monthly subscription amount must be between 3,000 and 70,000 AED.

The new Law allows an insured individual to request the purchase of a nominal period of adjoining to be added to their actual service periods provided they have actually worked at least 25 years when submitting a purchase request or 15 years if they have reached 60. The period required to be purchased should not exceed five years for men and women.

The new Law introduces further equality between insurers from the public and private sectors. A pensioner whose subscription period has reached 30 years, has the right to combine the pension with salary, regardless of their value. This combination applies to retirees from the public and private sectors.

The Law also states that the payment of the pension will be suspended if a pensioner joins a new job covered by the provisions of the new Law in exchange for compensation, whether a monthly salary, a lump sum, or a reward if this compensation is equal to or greater than the value of the pension and they will be paid the difference if the new salary is less than the pension amount. The pension will be repaid at the end of service in line with Federal Decree-Law No. 57/2023.

Monthly contributions for insured individuals will be 26% of their contribution account salary. The insurer’s contribution will be 11% of the insured’s contribution account salary and the employer’s contribution will be 15% of the insured’s contribution account salary.

The government’s contribution will be 2.5% of the private sector employer’s share for Emirati nationals whose contribution account salary is less than 20,000 AED.

This will be the case to encourage UAE nationals to be recruited into the private sector.

To unify general rules between the public and private sectors, the pension calculation mechanism will be determined based on the average contribution account salary of the last six years of the subscription period or the entire contribution period if less for employees in both sectors.

Under the Law, the Authority has been authorised to draft the Implementing Regulations to the Law and conditions for employers and self-employed people to benefit from the new Law.

The Finance Minister will issue a Decision once approved by the Authority’s Board of Directors.

The Authority is also authorised to draft the necessary Implementing Regulations and conditions to apply the provisions of the GCC Insurance Protection Extension Programme.

It has been issued to improve the Authority’s policies as well as how it works and ensure financial resources of pensions are sustainable.

It has also been issued to honour the Authority’s future commitments.

It also aims to improve the flexibility of pension and social security services in the UAE and mitigate against any gaps in services and policies provided to UAE nationals working in the public and the private sectors. Moreover, the Law will bring further equality in insurance benefits to encourage UAE nationals to join private sector companies.

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Tanya Jain