A New Era of Retirement Savings: Unpacking the UAE’s Voluntary Alternative End-of-Service Benefits Savings Scheme
In a landmark move aimed at bolstering financial security and retirement planning, the UAE government has introduced the Voluntary Alternative End-of-Service Benefits Savings Scheme. This groundbreaking initiative, effective from November 1, 2023, marks a significant step forward in safeguarding the future of UAE residents.
The new Voluntary Alternative End-of-Service Benefits Savings Scheme, launched by MoHRE and SCA, provides private and free zone sector employees with an optional alternative to the current gratuity system. Employees can opt to invest their end-of-service benefits in licensed investment funds, potentially increasing their retirement savings.
This means that employees can choose to have their end-of-service benefits invested in a licensed investment fund, potentially generating returns that can enhance their retirement savings.
The scheme is expected to have three investment options.
- Capital guaranteed – risk-free investment to maintain capital.
- Risk based – where the risk level varies between low, medium, and high and
- Sharia compliant
What are the Key Features?
- Voluntary participation for employees and employers
- No minimum salary requirement
- Employer contributions of 5.83% or 8.33% of monthly basic salary, depending on employee tenure
- Investment options with varying levels of risk and return
- Sharia-compliant investment options
- Option for employees to make voluntary contributions.
Who are eligible?
Employees in the private and free zone sectors. There are no minimum salary requirement.
How does one participate?
It is the employer’s choice whether to subscribe to the Alternative Scheme or not.
- Employers must register with the Ministry of Human Resources and Emiratization (MoHRE)
- Employers must select and contract with licensed investment funds.
- Employers must decide which employee categories and levels should be included in the program.
- Employees can choose to make voluntary contributions.
What does it mean for employees?
- Potential for enhanced retirement savings
- Protection from inflation, default, or bankruptcy
- Structured approach to retirement planning
- Increased financial security and stability.
- Reduces Labor Disputes
Apart from the above, the scheme empowers employees to take control of their financial future by providing them with the opportunity to invest their end-of-service benefits in a diversified portfolio of investment options. This proactive approach to retirement planning can significantly enhance their long-term financial well-being.
A Positive Step Forward:
The introduction of the Voluntary Alternative End-of-Service Benefits Savings Scheme marks a significant step forward in promoting financial literacy, retirement planning, and long-term financial security among UAE residents. By empowering individuals to take control of their financial future, the scheme paves the way for a more secure and prosperous future for all. Visit MOHRE for more information.
