The United Arab Emirates (UAE) is a very attractive prospect for expats. From the lack of income tax to its glamorous lifestyle, there are many benefits to living here. However, one aspect of life that doesn’t always get mentioned is retirement plans in the UAE for expats.
People tend to think of it as a country in which you enjoy life now, not later. Easy accessibility to retirement funds compared to in the UK makes it hard to resist temptation. And stories of pension mis-selling scandals also put expats off UAE retirement plans.
In this article, we’ll help you understand the UAE pension scheme for expats, including the new Golden Pension Scheme, and show how important it is to have a retirement plan in Dubai and the UAE.
Understanding the UAE pension plan landscape
In recent years, the UAE has undertaken economic, social and legal reforms in order to:
- Strengthen the country’s business environment and reputation
- Increase foreign direct investment
- Attract a skilled workforce
- Give incentives to companies that could then set up, or expand, in the UAE.
The Golden Pension Scheme, or gold scheme, in the UAE, is the latest addition to the UAE retirement plan landscape. Before then, options for retirement savings included:
End-of-service gratuity benefits
These benefits are mandated by the government for employees. End-of-service gratuity is given if you are an employee in the UAE and leave a company – providing you have worked there at least a year.
However, you may need more than this to comfortably retire on. Recently, the government unveiled a new addition, called the Voluntary Alternative End-of-Service Benefits Scheme.
This latest initiative is optional, and allows registered employees to invest their end-of-service gratuity benefits into investment funds that have been approved by the Ministry of Human Resources and Emiratisation (MOHRE) and the Securities and Commodities Authority (SCA).
National Bonds
National Bonds Corporation PJSC (NBC) is a savings and investment company owned by the Investment Corporation of Dubai (ICD). NBC offers Sharia-compliant savings and investments, to individuals as well as corporations and encourages UAE residents to save through a variety of options including:
- Savings schemes
- Investment plans
- Retirement schemes
The Golden Pension Scheme in UAE
What is the UAE’s Golden Pension Scheme?
The Golden Pension Scheme is a relatively new scheme, offered by the UAE government through the NBC, to provide a UAE pension scheme for expats.
This pension is intended to help employees to bridge the gap in their retirement savings, plus support employers in funding their end-of-service financial commitments.
How does the Golden Pension Scheme work?
- Employers – can register by either investing their employees’ accumulated end-of-service benefits as a lump sum, or, invest a portion.
- Employees – expats can contribute to the gold scheme, monthly.
Who is eligible for the UAE’s Golden Pension Scheme?
All expats employed in the UAE private sector have the chance to future-proof their retirement finances.
What are the benefits of the UAE Golden Pension Scheme
- Employers – the Golden Pension Scheme will help retain employees while enabling employers to plan and prepare for end-of-service gratuity payouts, without having to rely on payouts from operational funds.
- Employees – monthly contributions are affordable, profit rates are competitive and there’s transparency to profit calculation.
UAE Golden Pension Scheme for expats compared to traditional UK pension schemes
Although promoted as a UAE pension for expats, this scheme actually works more like a long-term savings plan. It helps employees accrue wealth towards their end-of-service gratuity, rather than the traditional defined benefit schemes or defined contributions of UK pension plans.
Is a retirement visa needed to gain a golden pension in the UAE?
No, a retirement visa isn’t needed to gain a golden pension in the UAE. Although both are designed to improve financial security for expats, the visa is a separate initiative, offered to people who are at least 55-years-old and able to fulfil specific financial criteria.
Retirement planning for expats in the UAE
Having a retirement plan in the UAE is of vital importance. To live in such a beautiful, glamorous country and enjoy the lifestyle on offer in your golden years, you need to ensure you have enough resources in advance. By planning for retirement, you can:
- Maintain your financial independence
- Reduce stress and uncertainty
- Know that cover expenses such as healthcare costs
- Leave a legacy for your family
Alternatives to traditional pensions
For expats in the UAE, planning for retirement requires exploring options beyond traditional pensions, as such schemes are generally unavailable to non-citizens. Fortunately, there are several robust alternatives to help you secure your financial future while living abroad. Let’s delve into these options, highlighting their benefits and practical applications.
Stocks, Bonds, and Mutual Funds
Investing in stocks, bonds, and mutual funds can be a powerful way to grow your wealth for retirement. These options offer flexibility, accessibility, and diversification, catering to different risk tolerances and financial goals.
- Stocks: Ideal for long-term growth, stocks allow you to invest in companies worldwide. While they carry higher risks, they also offer the potential for significant returns, making them a key component of a well-balanced portfolio.
- Bonds: Bonds provide stability and consistent income. Options such as government bonds or corporate bonds can be tailored to suit conservative investors seeking lower-risk returns.
- Mutual Funds: Managed by professionals, mutual funds pool resources from multiple investors to create a diversified portfolio. This option is especially appealing for expats who prefer a hands-off approach but still want exposure to global markets.
These investment options can be the cornerstone of a retirement strategy designed to build wealth steadily and manage risks effectively.
Learn more about how alternative investments compare to traditional options in our guide: Alternative Investments vs. Traditional Investments.
Consistent Savings Strategies
Saving consistently is another essential strategy for expats planning their retirement. While it may seem straightforward, the key to success lies in leveraging the right tools and maintaining disciplined contributions.
- Monthly Savings Accounts: These accounts encourage regular deposits, allowing you to build a significant nest egg over time. Many UAE banks offer competitive interest rates and tailored plans for expats.
- Sharia-Compliant Savings: For those seeking investments aligned with Islamic principles, Sharia-compliant accounts offer ethical, secure savings options. These accounts avoid interest and invest in approved activities.
- End-of-Service Benefits: Instead of immediately spending your end-of-service gratuity, consider reinvesting it in long-term savings or low-risk plans to grow your retirement fund effectively.
By adopting consistent savings strategies, expats can harness the power of compounding interest to grow their funds steadily.
For insights into effective savings methods, check out our article: Saving vs. Investing.
MHG Wealth’s retirement planning service
Retirement planning can be time-consuming and confusing. MHG Wealth Management retirement planning service can make it that much easier.
We’ll assign you an expert expat wealth management advisor, who will assess your financial situation and estimate what you need in the future. From there, we’ll implement a thorough plan to ensure you get to enjoy the lifestyle you deserve when you retire.
If you’re looking for a UAE pension scheme for expats, MHG Wealth are the experts in retirement planning. Call today to set the ball rolling on your financial future.
FAQS:
Do expats get a pension in the UAE?
No, expats in the UAE are not eligible for the mandatory national pension scheme, which is exclusively available to Emirati citizens. However, expats can explore other retirement savings options such as the Golden Pension Scheme, end-of-service benefits, and alternative investments like mutual funds or bonds.
Who is eligible for a pension in the UAE?
The UAE pension system is limited to Emirati nationals working in the public and private sectors. Employers contribute to this scheme on behalf of their Emirati employees. Expats, however, can benefit from end-of-service gratuities and voluntary savings plans to prepare for retirement.
How much is the UAE pension?
The UAE pension for Emirati nationals is calculated based on the individual’s salary and years of service, with a maximum contribution period of 35 years. For expats, the end-of-service gratuity serves as a retirement benefit, which depends on the length of employment and basic salary.
What is the Golden Pension Scheme in the UAE?
The Golden Pension Scheme is a voluntary initiative designed to help expats save for retirement by contributing to investment funds approved by the UAE’s Ministry of Human Resources and Emiratisation (MOHRE). Employers and employees can both contribute, and the scheme offers competitive profit rates with a focus on transparency and growth
