The Role of Workplace Solutions in Enhancing Retirement Planning

March 18, 2024 thehrobserver-hrobserver-retirement-retirementplanning

Traditional gratuity schemes based on a defined benefit are undergoing re-evaluation as expat residents are increasingly considering staying in the region longer, a decision encouraged by government initiatives and lifestyle benefits.

To illustrate, in our recent YouGov survey, we saw that no less than 69% of residents are considering retiring in the UAE. We are witnessing significant shifts in the end-of service regime within the UAE and the wider GCC region, reflecting changing demographics and economic dynamics.

The UAE is at the forefront of this change with the reforms made to end-of-service benefits in theThe Dubai International Financial Centre’s (DIFC) in 2020 and the introduction of a new voluntary end-of-service (EOS) gratuity system across the UAE in Q4 of 2023. 

More recently in 2024, Bahrain also announced a change to how EOS gratuity is to be accrued, by mandating employers to make their mandatory contributions of non-Bahraini employees monthly into the Social Insurance Organisation with effect from 1 March 2024.

These initiatives address the important need of providing security of employees’ EOS benefits from the risk of employer insolvency or other factors which may impact their ability to fulfil their obligation upon an employee leaving service. Moving towards a defined contribution approach aligns the region with global best practices.

Additionally, some of the GCC countries are recognising and responding to the needs of a less transient and longer-tenured expatriate population, as highlighted by a report from the World Government Summit.

Consequently, with longer life expectancies and a significant portion of the population nearer to retirement age, there’s a growing urgency to re-think the current system to ensure that it caters to this changing dynamic.

In our study conducted last year, workplace retirement savings emerged as the most highly valued benefit that employees expect from their employers (34%). Defined contribution EOS gratuity schemes are gaining prominence, as they provide a secure, structured and flexible framework for employers to fulfil their obligations and for employees to secure their benefits. 

Such schemes regulated by the appropriate authority offer security from the credit risk of the employer and provide employees with a valuable tool to augment their retirement planning, particularly if they have a desire to retire in the region. Moreover, innovative workplace solutions are gaining traction, recognized by employers as an effective talent attraction and retention tool.

Employer-sponsored savings plans, into which employees have the option to make voluntary contributions, are getting increasingly popular, empowering individuals to take control of their financial futures. 

The DIFC Employee Workplace Savings (DEWS) plan is an example of such an initiative; the scheme was pioneered in the DIFC and has since been expanded to 65 Dubai Government entities and 9 free zone authorities.

We are witnessing regulatory frameworks evolving in the region with a view to provide both security and integrity of long-term savings schemes, promoting financial wellness, fostering innovation and enhancing the UAE’s standing as a talent hub, attracting and retaining the best global talent while paving the way for a more secure financial future for residents.

With rising life expectancy and escalating living costs, planning for retirement is more critical than ever. A few tips on how to plan for a better retirement would be: 

Educate yourself. Take an interest in personal finance. Do your research and consult a professional financial advisor. Grow your knowledge over time. The basics are simple, and the first step is getting started!

Start early – or start now. Be consistent and disciplined. Smaller contributions made consistently over a longer time horizon usually yield better results than lump sum investments made sporadically in an attempt to time the market. 

Manage your expenses wisely. Being able to retire well is more dependent on how you save and invest rather than on how much money you make.

Finally, if your employer provides you with the opportunity to make voluntary contributions to a workplace savings or EOS gratuity plan, it may provide you with a cost-effective way to save and invest. 

Most workplace savings plans will give you the opportunity to make a voluntary contribution apart from your employer’s mandatory contributions. Taken directly from your salary, this enables you to pay yourself first and can help you build savings and investment habits which will pay off in the long run.

Wilson Varghese

Senior Executive Officer, Zurich Workplace Solutions

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