Expats in Dubai may soon benefit from a dedicated pension scheme if plans from Dubai’s Department of Economic Development go ahead.
According to officials from the emirate, the government has recently carried out a feasibility study of a potential expatriate-targeted pension fund and may launch it as early as the end of this year.
Discussing the plans, Ali Ibrahim, deputy director general for planning and development at DED commented: “We have finished the feasibility study for the project and DED are now consulting with local and federal parties…we are also coordinating with some parties in other emirates and are planning to hold workshops on the project.
“You can say the project is nearly ready…once we complete negotiations with other departments, we will seek government approval so the project can be launched by the end of the year.”
It is believed that the pension scheme will be designed to encourage expatriates who work in and around Dubai to keep their money in the region instead of transferring it overseas. The feasibility study was conducted in reaction to a publication from the Washington D.C-based international crediting organization, which indicated that the majority of the emirate’s two million foreign nationals send around 40 per cent of their earnings back to their native countries. This amounted to 41.2 billion dirhams ($11 billion) last year, up 6.2 percent from 2010 and more than double the 2004 level. One potential reason for the levels of overseas remittance has been attributed to the fact that Dubai does not currently offer expatriates any type of permanent residency and expats who end their work contracts have a very limited period of time to leave the country, which means that workers do not see a future for themselves in the emirate beyond their immediate work placement. The World Bank have proposed three potential solutions to this dilemma: retirement savings accounts; mobility savings, offering jobless expatriates monthly payments until they find work and allowing them to extend visas; or improvements to the current system, in which workers leaving their jobs get a lump sum based on length of employment.
When questioned as to whether a similar scheme may be rolled out throughout the rest of the United Arab Emirates, Ali Ibrahim commented: ”I think it is better to be implemented on the federal level….after Dubai took the lead in this project, I believe there is now a trend to set up a federal pension fund…this one requires the support of relevant departments, including the Ministry of Labor.”
There is not yet any confirmation concerning whether the pension scheme will be compulsory.