New workplace savings product rolled out in UAE to help employees save for retirement

AXA Green Crescent Insurance Company rolled out a workplace savings plan to help UAE employees save for their retirement and improve their financial well-being.

The Employee Secure Saver plan helps employers provide employees with a savings vehicle similar to those available globally, the insurer said in a statement on Monday.

“Many in the country remain unaware that end-of-service benefit in the UAE is unlikely to be sufficient on its own for retirement – a life goal that requires careful planning,” Mohamed Seghir, chief executive of AXA GCIC, said.

A 2020 UAE Security and Savings survey by Mercer found that 45 per cent of expatriate employees either had no means to maintain a decent standard of living in their retirement, or plan to work beyond retirement age to derive enough income. A lack of financial awareness was also an issue among respondents, with 61 per cent saying they had no long-term savings.

“The duration of expatriate stays in the country is increasing with minimal provisions made for pensions in most cases. Our Employee Secure Saver is designed to help address this gap between required savings and what end-of-service benefit provides,” Mr Seghir said.

The Dubai International Finance Centre was the first body in the UAE to overhaul the gratuity system – a defined end-of-service benefit that all expatriate employees are entitled to after completing at least one year of service – when it introduced the DIFC Employee Workplace Savings (Dews) plan in February 2020.

Employers in the free zone are required to contribute an amount equal to 5.83 per cent or 8.33 per cent of an employee’s wage, depending on their length of service, on a monthly basis to a fund administered by a trust. Employees can also choose to make additional voluntary contributions to the Dews plan.

The Employee Secure Saver scheme will offer a range of investment choices alongside a Sharia-compliant fund to meet the needs of employees with a greater risk appetite as well as those who wish to invest in accordance with Islamic principles, AXA GCIC said.

“The future of the current defined benefit model has been on the minds of many in the UAE since the landmark announcement that the DIFC Employee Workplace Savings Plans will replace end-of-service benefits paid by employers,” David Howard, senior strategy manager of AXA GCIC, said.

“We have designed a solution to close the gap between retirement savings and end-of-service benefits and encourage employee retention.”

Employers can tailor the Employee Secure Saver plan to meet specific needs, such as ring-fencing end-of-service liabilities or as a mechanism to offer enhanced benefits as a differentiator in the employment market, the insurer said.

The Central Bank of the UAE has validated AXA GCIC’s life insurance products, which are in line with the life insurance regulations introduced in 2020, the statement added.