United Arab Emirates has been the Crown Jewel of the Arabian Peninsula. For decades it has prided itself on being an open and flexible government which fosters growth and prosperity.
Though the global meltdown has made it feel vulnerable, its picking up the pieces and starting afresh and making international headlines. One of those is the possibility of a pension for the expat population.
To be fair the UAE has considered this two years ago, but it was put aside as there were other matters which required the governments? attention.
Looking from outside, it all looks rosy, but if you?re an expat living in the UAE for a while you will understand that it?s a different story. Though living in the UAE tax free does have a drawback. The lack of pension or some kind of a safety net is quite scary.
The pension scheme has been brought back from hibernation by the World Bank. It suggested that provision of pension for expatriates is the best option to improve employment laws including staff benefits.
An unnamed official from the World Bank had told the National Newspaper: ?We are providing technical assistance in the area of employment policy?This is a very important initiative for the UAE to design better employment policies based on better data that?s more timely. It covers the areas of expatriate benefit treatment including pensions,?
“There’s a lot of experience globally on pension schemes including some that pertain to portable pension schemes, which could be applied to expatriate labour,” the official added.
How does it work?
It’s actually a simple global process.
“The employer would have to pay regularly to a fund supervised by a Government entity,” said Maurizio Bussi, the deputy regional director for Arab States at the International Labour Organization (ILO).
Usually it would be a certain % from the employees monthly salary and an additional certain % would be put by the employer, which would be done on a monthly basis.
As simple as it may sound, it is more complicated.
Why a pension plan?
A pension plan would basically provide a leverage for the employees.
Nasser Munder, the Filipino labour attach? in Abu Dhabi, said a pension fund for the expatriate workforce would guarantee that workers receive their end-of-service benefits from their employers. (Quoted from The National)
There have been many complaints that workers have found it difficult to obtain their full and final settlement from their employers at the end of the contract. In terms of a pension plan the employers have not say on it as it?s the responsibility of the government.
The employee?s right would be upheld.
The Middle East and North Africa region is becoming very competitive. Competitive in hiring the best intellectual capital.
To maintain the competitiveness of brand UAE, a pension plan is an ideal strategy.
Tim Searle, the chief executive of Globaleye, ?There?s no pension scheme at the moment and it would be an attractive option for anyone to take up employment here if there was.? (Quoted from The National)
And by making UAE more attractive to professionals there is a possibility of closing the ?gaping open wound? that is the local property market.
“This especially indicates that the UAE is not looking for short-term labour contracts,” said Azeem Ibrahim, an economic adviser to the government of Pakistan. “This sends a message that their contributions will be valued.”
Financial experts say the prospect of offering pensions could help to woo more foreign workers to the emirate as well as encourage them to stay longer in the country, the paper reported.
The pension scheme at the moment has only be addressed by the UAE government whereas other MENA governments are waiting and watching.
However this cannot be told by the expats in those countries.
New research reveals that almost two thirds of expats living in the Middle East hope to retire before they reach 60 but far fewer are confident of doing so.
The study by Zurich International Life (ZIL) shows that, despite an average of 60 percent of expats in the Middle East targeting an early retirement age, only 56 percent believe they will be able to achieve it.
Expats in Bahrain are the most optimistic with 71 percent confident of retiring at their target age, followed by Qatar with 49 percent and UAE ? the most pessimistic- with 48 percent.
This just shows that the expats in the UAE prefer to stay in the UAE rather than retire to their home country.
It should be noted that the expats have started to think sensibly after the global meltdown.
The research continues to say that an average of 35% of respondents have started their own pension plan.
The second phase of the Zurich Wealth Monitor – a study into the future plans of 700 expat professionals living in the UAE, Bahrain and Qatar ? also shows that 56 percent of respondents are using their extra income to supplement their retirement fund.
Paul Haran, Zurich?s Middle East regional director said: ?Whilst it is not surprising to find a gap between the ideal and the realistic retirement age, it is encouraging to see so many expats taking steps to redress the imbalance.?
Its not an easy thing to do. An expat pension scheme is both tricky and complicated, especially when considering the ongoing Emiratisation drives.
Anyhow no one can disagree that for UAE to secure its position as lucrative future destination for working professionals, it needs to resolve this issue quickly.