There is a growing buzz around the new End-of-Service Savings (EoSS) scheme, which was introduced last November by the Ministry of Human Resources and Emiratisation (MoHRE) and the Securities and Commodities Authority (SCA).
To recap: The current “End-of-Service Gratuity Benefit” system is being revamped. Instead of a lumpsum cash payment at the end of employment, employees will instead receive regular monthly contributions from employers that are invested in approved funds (EoSS funds). Upon leaving employment, employees will gain access to these funds, which will have grown over time. Please read here a short article that explains the new system.
More and more companies are asking: What is this about? Is it worth making the switch? Should we make the switch now?
Pensions Monitor is here to help. In this article we briefly explain some key considerations for employers and HR professionals with regard to the new EoSS scheme.
First consideration:
Do companies have to transition to the new EoSS scheme?
No. At present, the new system is entirely voluntary. Companies can choose to enrol groups of employees, or all employees, or no employees at all in the new EoSS scheme.
However, MoHRE has already announced that at some point in the future all companies and all employees will need to be enrolled in EoSS on a compulsory basis. But no such date has been announced yet.
Another key consideration: During this ‘voluntary period’, if a company decides to enrol groups of employees (or the whole company) into the new EoSS scheme, there is no easy way back. Companies commit themselves to stay in the scheme for at least 12 months, according to Article 13.1 of Cabinet Resolution 96. Moreover, certain penalties like blocks on new work permits and fines will apply for non-payment of basic subscription amounts (Article 12.3 and 12.4 of Cabinet Resolution 96).
Second consideration:
Should companies make the switch now?
At this point in time (and this article is released in August 2024) the simple answer is – No. Simply because at this present time, there is no EoSS scheme that is available yet.
Several providers have announced that they will enter this market and are busy working on delivering a product. Among them are Daman Investments who should be the first to launch possibly followed by Lunate who also received the initial approval from MoHRE in July 2024. Hayah Insurance, who also have a fund management license from SCA, is also expected to come on board subject to MoHRE’s approval.
Other active contenders include Emirates NBD, Abu Dhabi Commercial Bank, First Abu Dhabi Bank and National Bonds. Pensions Monitor will discuss more on Hayah Insurance and the other providers in the coming weeks.
Once the first products are out in the market, some employers might want to enroll a group of employees to test the waters. We recommend that employees are thoroughly consulted in this process, as this is a voluntary scheme and it is important to have full employee buy-in. After all, the decision will affect each employee’s pocket.
Others employers may want to “wait and see” how other companies are getting along with the new EoSS scheme.
But sooner or later the scheme will become compulsory, and so it is a question of “when should we switch?” and not “should we switch?”.
Third consideration:
Which fund manager will be the best for my company and employees?
Good question! Again, so far, there are no products that have been launched but once these become available, Pensions Monitor will compare EoSS products across various criteria, some of which include:
Range and breadth of investment funds on offer
Costs of fund
Performance of each fund
User interface i.e. app for employees and portal for HR/Finance teams to manage employee records, EOSB calculations, reconciliation tools, reporting, pay outs, etc.
Service quality i.e. training material, sessions, trouble-shooting, quality of customer care for HR teams and employees.
Please check back on www.pensionsmonitor.com for the latest developments and updates on EoSS products in the market. You can also sign up to our newsletters for updates straight to your inbox.
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