UAE announces new pension legislation

Additionally, it seeks to increase the nation's social security and pension systems' flexibility.

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The General Pension and Social Security Authority has announced the creation of a new Federal Decree Law.

The new law intends to uphold the authority's future obligations, guarantee the effectiveness and sustainability of pension financial resources, and enhance GPSSA policies and its operational framework.

It also seeks to improve the UAE's social security and pension systems' flexibility. Additionally, it seeks to close any gaps in the rules and services offered to UAE nationals employed by the public and commercial sectors.

Additionally, the law will increase insurance benefit parity in order to entice UAE citizens to work for private businesses.

Employees of Emirati companies taking part in the GPSSA who entered the labor force for the first time will be subject to the new law as of the date of publication.

The terms of the current Federal Law No. (7) of 1999 on Pension and Social Security will continue to apply to current employees.

A retiree who is receiving payment under Federal Law No. (7) of 1999 (as mentioned) or any other prior law will remain protected by the current law. Even if they started a new job after the new Federal Decree Law No. (57) of 2023 was issued, the insured person who received an end-of-service bonus in accordance with the terms of Federal Law No. 7 of 1999 or any prior law will still be covered by the current Federal Law No. (7) of 1999.

In order to encourage hiring UAE nationals in the private sector, the government bears (2.5%) of the employer's share for working Emirati nationals whose contribution account salary is less than (20,000) dirhams. The monthly contribution for the insured is defined as (26%) of their contribution account salary. The insurer bears (11%) of the insured's contribution account salary. The employer bears (15%) of the insured's contribution account salary.

The pension calculation mechanism is based on the average contribution account salary of the last six years of the subscription period (or, if less, the entire contribution period) for employees of both the government and the private sector in order to harmonize general regulations between the two sectors.

A minimum subscription period of 30 years is required, and the covered person must be 55 years of age to be eligible for a retirement pension. The new Law provides additional flexibility and rewards to working mothers in support of the family's essential role in society.

It states that working mothers have a shorter subscription period and a younger age at which to apply for retirement pension entitlement. In compliance with the terms and circumstances, she is also permitted to continue her optional membership in the event that she has opted to take time off to care for her children. In the event that the insurer requests an unpaid leave of absence in order to pursue graduate education, the new law permits them to profit from an optional subscription.

The value of the insured person's contribution account salary cannot exceed Dh100,000. In the private sector, the wage is set by the employment contract, as long as the monthly subscription amount is between Dh3,000 and Dh70,000. The monthly subscription salary for the government sector comprises the insured person's basic monthly salary in addition to monthly allowances such as the cost-of-living allowance, the social allowance for children, the social allowance for UAE nationals, and the housing allowance.

As long as the insured has worked an actual period of service of at least 25 years at the time the purchase request is submitted, or a period of 15 years if they have reached the age of 60, the new law permits them to request the purchase of a nominal period of adjoining to be added to their actual service periods. For both men and women, the time frame that must be purchased should not be longer than five years.

Government and private insurers now enjoy even greater equity according to the new Federal Decree Law. Regardless of their respective values, the pensioner whose subscription time has reached 30 years is entitled to combine their pension and pay. Both public and private sector retirees can use this combination. The law further states that if a pensioner accepts a new job that is subject to the new law's provisions in exchange for compensation (a lump sum, monthly salary, or reward), the pension payment will be suspended if the new job's value is equal to or greater than the pension. If the new salary is less than the pension amount, the pensioner will be compensated for the difference. At the conclusion of employment, the pension will be paid out in line with the Decree Law's stipulations.