Apart from the two DIFC workplace savings plans (DEWS, GO SAVER) and the newly introduced End-of-Service Benefits (EOSB) Savings Scheme under Cabinet Resolution 96/2023 – let’s call these the “official schemes” – there are a number of other savings schemes on the market that are “voluntary”.

Today, we shine a light on these other “voluntary” schemes. There are several such voluntary schemes in the UAE today. The “Golden Pension Plan” by National Bonds is a good example, as is “Employee Secure Saver” by HAYAH Insurance, or “MEWSS” by Praxis. In addition, there are several other international corporate pension plans offered by other financial institutions.

(Note: This article aims is to provide an unbiased, informative perspective on voluntary schemes without inadvertently influencing perceptions, endorsing or critiquing any particular voluntary scheme or provider.)

So, how do voluntary schemes work, are they beneficial, and how do they compare to the official savings schemes? Let’s break it down.

How do voluntary savings schemes work?

Each of these voluntary schemes are different, hence in this article we only summarize the common features:

• Companies fund their EOSB gratuity liability through regular monthly contributions.
• These contributions typically align with UAE Labour Law No. 33/2021 (UAE Labour Law): 5.83% of an employee’s monthly basic salary (for service under five years) and 8.33% for employees with more than five years of service. These payments are made in addition to employees’ salaries. Employers may also opt to make additional voluntary contributions.
• Some schemes allow companies to retain full control over contributions, while others enable employees to choose how these contributions are to be invested.
• Certain funds offer a capital guarantee, that is to say, the fund’s value will never decrease.
• Monies are usually released once an employee retires, or leaves the company.
• In addition to the contributions paid by the employers, employees can usually also make additional voluntary contributions.

Many readers may now think: hang on! This sounds very familiar. Isn’t this exactly how the official schemes work?

How do these schemes differ from the official schemes?

While there are several minor differences, the most crucial distinction is regulatory approval.

These voluntary schemes are not approved by the respective regulators for labour affairs, that is the Ministry of Human Resources and Emiratisation (MoHRE) for the mainland and Dubai Financial Services Authority (DFSA) in the DIFC.

This means that these voluntary schemes are not seen as valid replacements of the existing EOSB Gratuity system. Under UAE Labour Law, companies remain legally obligated to pay out EOSB gratuity based on the standard formula, regardless of how voluntary savings scheme investments perform.

So, are these voluntary schemes worth considering?

We at Pensions Monitor like these voluntary schemes, as they introduce several elements which we believe are “best practice”. For instance, the EOSB Gratuity is funded – in marked contrast to the current system, which doesn’t oblige companies to do so.

In addition, some of the schemes introduce employees to the fact that they have agency in making savings for their retirement. And of course, financially, in most cases employees and companies may be better off (subject to fund performance).

On the flip side, one may ask the question whether it’s worthwhile for a company to sign up to such a scheme, knowing that in (perhaps) two years they may have to enroll in one of the official schemes? It certainly is a hassle and a big HR project to introduce such a scheme – and an even bigger job to then switch from one to another one.

The future of voluntary schemes

It is safe to assume that the providers of these “voluntary” schemes are now busy seeking approval from the regulators of the mainland scheme i.e., the Securities and Commodities Authority (SCA) and MoHRE. In fact, National Bonds have already managed to do that, and it is to be expected that their voluntary “Golden Pension Plan” will eventually be folded into their official EOSB Savings scheme.

Conclusion

Pensions Monitor believes these voluntary schemes are great products. However, one must bear in mind that they do not absolve employers from the obligations as stipulated in the UAE Labour Law.

No doubt, we will see some of these schemes morph into “official” schemes in due course. If a company is confident that this will happen, then adopting such schemes could be a smart move today. However, if a company is uncertain as to whether these providers will gain official status, it may be wiser to wait to avoid unnecessary administrative hurdles when switching schemes, as well as the hassle of having to explain an entirely new product offering to employees.

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We hope you found this article useful. Do write to us if you have any questions on the topic and don’t forget to sign up for our free newsletter. Pensions Monitor doesn’t just break news, we share valuable insights on various aspects of EOSB.