UAE Introduces New Monthly Pension Contribution System for Private Sector

The UAE has implemented a significant change in its pension system, raising the monthly pension contributions for Emirati employees who entered the workforce after October 31, 2023.

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UAE Increases Monthly Pension Contributions for Emirati Employees

The adjustment, stipulated in Law No. 57 of 2023, results in a total contribution salary of 26 percent, with the employee contributing 11 percent and the employer covering the remaining 15 percent. However, the government supports Emiratis working in the private sector with contribution accounts below Dh20,000 by contributing 2.5 percent.

Previous Contribution Structure

Employers used to put in 12.5 percent, and employees put in 5 percent of their monthly pay into the contribution account. The remaining 2.5% contribution was made by the government, demonstrating a joint endeavor to encourage retirement savings.

Government Support for the Private Sector Employment of Emiratis

To encourage the hiring of Emiratis in the private sector, the government extends support by contributing 2.5 percent for those with contribution account salaries below Dh20,000. This strategic move aims to enhance Emirati participation in the private job market.

Implementation Guidelines for Employers

The General Pension and Social Security Authority of the UAE has outlined clear guidelines for government entities and private sector companies employing UAE citizens. These entities are given two options to implement the new contribution rates for three months, spanning from October to December 2023.

The circular, distributed in November, provides detailed instructions on the procedures for transferring contribution payments on behalf of Emiratis newly entering the workforce or those not previously covered by the existing Law No. 7 of 1999.

Emphasis on Government and Private Sector Collaboration

The adjustment in pension contributions reflects a collaborative effort between the government and private sector entities to ensure the financial well-being of Emirati employees in their retirement years. This strategic move aligns with broader initiatives to strengthen social security and support the national workforce in both the public and private sectors.

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