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UAE announces new law on pension

It also aims to enhance the flexibility of the pension and social security services in the country

A new Federal Decree Law has been announced by the General Pension and Social Security Authority.

The new law aims to improve the policies of the GPSSA and its work system, to ensure the efficiency and sustainability of the financial resources of pensions, and to honour the authority’s future commitments.

It also aims to enhance the flexibility of the pension and social security services in the UAE. It also aims to mitigate any gaps in services and policies provided to the UAE nationals working in the government and the private sectors.

Moreover, the law will bring further equality in insurance benefits to encourage UAE nationals to join private sector companies.

The new law will be applied to Emirati employees who joined the labour market for the first time from the date of its publication onward in organisations participating at the GPSSA.

Current employees will continue to be covered by the provisions of the current Federal Law No. (7) of 1999 on Pension and Social Security.

A pensioner receiving a pension in accordance with the provisions of Federal Law No. (7) of 1999 referred to or any previous law shall also continue to be covered by the current law. The insured person has received an end-of-service bonus in accordance with the provisions of Federal Law No. 7 of 1999 or any previous law, will continue to be covered by the current Federal Law No. (7) of 1999, even if they started a new job after the issuance date of the new Federal Decree Law No. (57) of 2023.

The monthly contribution for the insured is defined in (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, and the government bears (2.5%) of the private sector employer’s share for working Emirati nationals whose contribution account salary is less than (20,000) dirhams, to encourage recruiting UAE nationals in the private sector.

To unify general rules between government and private sectors, the pension calculation mechanism is determined based on the average contribution account salary of the last six years of subscription period (or, if less, the entire contribution period) for employees of both government sector and private sector.

The minimum age for the insured person to be entitled for a retirement pension is 55 years, with a minimum subscription period of 30 years. In support of the family’s vital role in society, the new Law grants working mothers’ more flexibility and benefits.

It stipulates that the working mother can apply for retirement pension entitlement in younger age and shorter subscription period. She is also authorised to maintain her optional subscription if she has chosen to take leave to care for her children, in accordance with the terms and conditions. The new Law authorizes the insurer to benefit from optional subscription in case they requested an unpaid leave to pursue postgraduate study.

The monthly subscription salary for the government sector consists of the basic monthly salary of the insured person, in addition to the monthly allowances, including: 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 insured’s contribution account salary should not exceed Dh100,000; however, in the private sector, the wage is determined by the employment contract, provided that the monthly subscription amount is not less than Dh3,000 and does not exceed Dh70,000.

The new law allows the insured to request the purchase of a nominal period of adjoining to be added to their actual service periods provided that they have worked actual period of service of at least 25 years when submitting the purchase request, or a period of 15 years if they have reached the age of 60 years. The period required to be purchased should not exceed 5 years for both men and women.

The new Federal Decree Law introduced further equality between insurers from government and private sectors. The 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 government and private sectors. The Law also stipulates that the payment of the pension shall be suspended if the 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 accordance with the provisions of the Decree Law.

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