New Pension Law in the UAE: Changes and Guidelines

The General Pension and Social Security Authority (GPSAA) recently disclosed crucial information regarding the UAE’s pension laws. Decree Law No. (57) of 2023 brings notable changes, impacting entities that have hired Emiratis as of October 31. These entities have to pay 26% of their income towards pension.

Here’s a breakdown of the key aspects and guidelines:

I. Pension Rates for Entities

Entities hiring Emiratis post-October 31, 2023, are now obliged to contribute 26% of their incomes toward pensions, as per Decree Law No. (57) of 2023. Meanwhile, entities that employed Emiratis before this date continue to pay 20%, as outlined in Law No. 7 of 1999.

II. Guidelines for Pension Transfer

A circular has been issued to both government and private entities, offering detailed guidelines on transferring pensions for Emiratis joining the workforce after October 31, 2023, who were not previously covered by Law No. 7 of 1999.

III. Payment Options Under the New Law

Under the updated law, employers have two options to fulfill the new pension amount:

1. Gradual Payment:
   • Employers can pay contributions for October, November, and December 2023 at the previous rate of 20% and cover the difference of 6% by January 1, 2024.
2. Immediate Payment
   • Alternatively, employers can opt to pay the entire 26% pension amount, starting from October 2023, regardless of the date the insured joined work.

IV. Breakdown of Pension Contributions

Under the new law, the insured individual bears 11% of the pension amount, while the employer covers the remaining 15%. Additionally, for Emiratis in the private sector with contribution account salaries below Dh20,000, the UAE government contributes 2.5% to encourage hiring more Emiratis.

V. Maximum Contribution Account Salary

The maximum contribution account salary for government sector employees is Dh100,000, while for private sector employees, it is Dh70,000, provided the employee’s contribution account salary is not less than Dh3,000.

VI. Grace Period for Contribution Differences

Entities won’t face additional charges for delayed contribution differences from October to December 2023 if the employer ensures accuracy in all statements, data, and documents submitted.

VII. Exemptions from the New Law

The law doesn’t apply to Emiratis who received end-of-service gratuity before October 31, 2023. Ministers retiring before this date, even if they return to work later, remain covered by the 1999 law.

VIII. Retirement Pension Highlights

• 2.67% of the pension account salary for each of the 30 years of service, at a rate of 80%.
• 4% of the pension account salary for each year beyond 30 years, at a rate of 20%.
• 100% of the pension account salary for 35 years of service.
• End-of-service gratuity at the rate of 3 months’ salary for a service period exceeding 35 years.
• The retirement pension begins the day after the end of service.
• The minimum pension is set at Dh10,000.

The General Pension and Social Security Authority emphasizes the importance of updating records for seamless pension transfers. Entities are encouraged to participate in workshops and awareness campaigns to understand the new law’s obligations and benefits.