UAE Pension Guide

End of Service Gratuity (ESG)

• Lump-sum on leaving: The End of Service Gratuity is a lump-sum payment made to the employee upon the termination of employment. It is NOT a regular pension payment — it is a one-time settlement of the accrued service benefits.
• Calculation: 21 days of basic salary per year for the first 5 years, 30 days per year for the subsequent years. The gratuity is capped at 2 years of the basic salary. Only the basic salary is used — the allowances are excluded.
• Graduated entitlement: 1 to 3 years of service: 1/3 of the full gratuity. 3 to 5 years: 2/3. 5+ years: the full gratuity. No gratuity for less than 1 year of service.
• DIFC and ADGM exemptions: The employers in the DIFC may opt out of the standard gratuity by enrolling employees in the "DIFC Employee Workplace Savings Plan" (the "DEWS"). The ADGM has a similar "ADGM Savings Plan" that replaces the gratuity obligation.

GPSSA Pension — UAE Nationals

• Total contribution — 20%: The General Pension and Social Security Authority (GPSSA) pension applies exclusively to UAE nationals. The contribution is 20% of the gross salary (5% employee + 15% government/employer).
• Retirement age: The pension eligibility age is 60 for men and 55 for women, with a minimum of 15 contributory years. The early retirement is possible after 20 years of service with a reduced benefit formula.
• Pension calculation: The monthly pension = the "average pensionable salary" over the last 3 or 5 years (whichever is higher) × the "accrual rate" (2% to 2.5% per year of service) × the "years of service". The maximum pension is 80% to 100% of the average salary.
• Post-retirement adjustments: The GPSSA pensions are adjusted periodically for the cost of living. The pensioners also receive the medical coverage and the other benefits under the GPSSA scheme.

DIFC and ADGM Occupational Pension Schemes

• DIFC Employee Workplace Savings Plan (DEWS): The DEWS is a mandatory savings plan for the DIFC-registered employees. The employer contributes a minimum of 5.83% to 8.33% of the employee's gross salary (depending on the tenure) to the DEWS account. The employee may also contribute voluntarily. The funds are invested in the professionally managed investment funds.
• ADGM Savings Plan: The ADGM introduced the "ADGM Savings Plan" as an alternative to the standard End of Service Gratuity. The employer contributes a minimum of 5.83% to 8.33% of the salary to the employee's individual savings account. The contribution rates are lower than the standard DEWS but the structure is similar.
• Portability: The DEWS and the ADGM Savings Plan accounts are portable within the DIFC and the ADGM respectively. The employee retains the account when changing employers within the same jurisdiction.
• Withdrawal on leaving: On leaving the DIFC or the ADGM, the employee may withdraw the full account balance or transfer it to a private pension plan. The investment returns within the savings plan are tax-free (no capital gains tax in the UAE).

Voluntary Savings Plans

• Private pension plans: The international life insurance companies and the asset managers offer the "offshore savings plans" (the "Qualifying Recognised Overseas Pension Schemes" — the "QROPS" for the UK expats, the "overseas pension plans") and the "investment-linked savings plans". The contributions are invested in the global funds.
• Endowment and savings insurance: The UAE-based insurance companies offer the "savings and protection plans" — the "endowment policies", the "whole-of-life plans", and the "investment-linked policies". These combine the life insurance with the savings element.
• UAE Investment Accounts: The retail investors may open the "investment accounts" with the UAE banks and the brokers to invest in the global ETFs, the mutual funds, and the Sukuk (the Islamic bonds). There is no tax on the investment income or the capital gains.

FAQs

Can expats participate in the GPSSA pension?

No. The GPSSA pension is exclusively for UAE nationals. Expats are not eligible for the GPSSA coverage and do not contribute to the GPSSA.

Is the End of Service Gratuity taxable?

No. The UAE does not impose any personal income tax. The End of Service Gratuity is paid tax-free to both nationals and expats.

Are the DIFC/ADGM savings plans mandatory for all employees?

The DEWS (DIFC) and the ADGM Savings Plan are mandatory only for the employees working in the DIFC or the ADGM-licensed entities. The employers in the mainland UAE may choose to offer the same structure voluntarily, but they are not required to do so.