UAE Revolutionizes Pension System with Game-Changing Law

• GPSSA introduces Federal Decree Law No. (57) of 2023 for efficiency and equality.
• Enhance policies, sustain financial resources, and promote flexibility.
• Fill gaps in services for Emiratis in government and private sectors, incentivize private sector engagement.

The General Pension and Social Security Authority in the UAE has recently unveiled a groundbreaking Federal Decree Law, ushering in a new era of efficiency and equality within the pension system.

The primary objectives of this comprehensive law are to enhance the policies and operational framework of the GPSSA, ensuring the sustainability of financial resources dedicated to pensions and honoring the authority’s future commitments.

One of the key focuses of the law is to bolster the flexibility of pension and social security services throughout the UAE. This includes addressing potential gaps in services and policies offered to Emirati nationals employed in both government and private sectors. The legislation further aims to promote equality in insurance benefits, serving as an incentive for UAE nationals to actively engage in the private sector job market.

Effective from its publication date onwards, the new law primarily applies to Emirati employees entering the labor market for the first time in organizations participating in the GPSSA. Existing employees, however, will continue to be covered under the provisions of the current Federal Law No. (7) of 1999 on Pension and Social Security.

Additionally, pensioners currently receiving benefits under Federal Law No. (7) of 1999, or any previous legislation, will retain coverage under the existing law. Similarly, individuals who have received an end-of-service bonus in accordance with previous laws will continue to be covered by Federal Law No. (7) of 1999, even if they start a new job after the issuance date of the new Federal Decree Law No. (57) of 2023.

The law introduces a defined monthly contribution structure, with the insured contributing 26% of their contribution account salary, the insurer covering 11%, the employer bearing 15%, and the government covering 2.5% of the private sector employer’s share for Emirati nationals earning less than AED 20,000. This is a strategic move to encourage the recruitment of UAE nationals in the private sector.

In a bid to harmonize rules across government and private sectors, the law establishes a pension calculation mechanism based on the average contribution account salary of the last six years of the subscription period for both sectors. The minimum age for an insured person to be entitled to a retirement pension is set at 55, with a minimum subscription period of 30 years.

Recognizing the vital role of families, the law provides added flexibility and benefits for working mothers. Mothers can apply for retirement pension entitlement at a younger age and with a shorter subscription period, with the option to maintain an optional subscription during childcare leave. Moreover, the law allows insurers to benefit from optional subscriptions during unpaid leaves for postgraduate studies.

Distinct salary structures have been outlined for the government and private sectors, ensuring fair representation. The monthly subscription salary for the government sector comprises the basic monthly salary along with allowances, while the private sector wage is determined by the employment contract.

An innovative feature of the law permits insured individuals to request the purchase of a nominal period of adjoining to be added to their actual service periods, with specific conditions related to the years worked and age reached. This can extend up to 5 years for both men and women.

The new Federal Decree Law fosters equality between insurers in the government and private sectors. Pensioners with a subscription period of 30 years have the right to combine their pension with salary, irrespective of value. Notably, the law specifies conditions under which the payment of the pension may be suspended if the pensioner joins a new job covered by the law, ensuring a balanced approach to post-retirement employment.

In summary, the new Federal Decree Law No. (57) of 2023 represents a significant stride towards a more efficient, flexible, and equitable pension system in the UAE. It sets the stage for a future where retirees, whether from the government or private sector, can enjoy enhanced benefits, while simultaneously promoting the active participation of Emiratis in the private sector job market.

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