28 May 2024

Arushi Dhawan

In an effort to modernize the pension system and improve the financial security of its citizens and residents, the United Arab Emirates (UAE) recently introduced a new pensions law. This legislation marks a significant overhaul of the previous pension framework, aiming to provide a more robust, sustainable, and inclusive system.

Dubai: This article explores the key aspects of the new UAE Pensions Law, including its most critical articles and the implications for employees and employers within the UAE.

Background of the UAE Pensions Law

The UAE's commitment to enhancing the welfare of its workforce is reflected in the introduction of the new Federal Law by Decree No. (57) of 2023 Concerning Pension and Social Security (as the “Law”) . As the nation's economy continues to diversify away from oil reliance, the government recognizes the need to establish a comprehensive social security system that supports its demographic changes and economic reforms.

On 31st of October 2023, UAE Federal Decree Law No. 57 of 2023 (2023 Pensions Law) was enacted. The law, in force since its publication, is applicable to UAE national individuals commencing employment and registered with the General Pensions and Social Security Authority (as the “GPSSA”) for the first. Notably, it excludes UAE nationals covered by the 1999 Pensions Law, pensioners under the same law, and those who have received end-of-service gratuity under the 1999 Pensions Law.

The Law introduces several significant changes designed to enhance the pension system's effectiveness and sustainability.

Key Changes Introduced by the 2023 Pensions Law

  1. Increased Pension Contributions

The Law stipulates revised contribution rates for both employers and employees, aiming to ensure that the pension funds are capable of providing sufficient post-retirement income. Employers are now required to contribute a higher percentage compared to the previous law, which helps in accumulating a larger pension fund for employees.

    • Contributions must be made on monthly basis to the GPSSA based on the employee’s full salary, including incentives.
    • Employers are required to contribute 15% of the employee's salary, with 2.5% covered by the government for private sector employees earning less than AED 20,000 monthly.
    • Employees contribute 11% of their salary.
    • Contributions are calculated as full months, even for partially worked months.
  1. Pensionable Salary Cap
    • The maximum salary cap for pension contributions has been raised.
    • For public sector employees, the cap is increased from AED 50,000 to AED 100,000.
    • For private sector employees, it is raised from AED 50,000 to AED 70,000.
    • Unlike the 1999 Pensions Law, the new law does not include end-of-service gratuity for amounts above the pensionable cap.
  2. Eligible Service Periods
    • Contributions must continue during periods of leave, secondments, and unpaid periods like study or sick leave.
    • Employees on unpaid study leave or childcare leave (up to three years) can opt to continue contributions by paying all dues for the period.
    • Suspensions without pay allow for withholding contributions.
  3. Retirement Entitlement
    • The minimum retirement age is set at 55 years with a minimum subscription period of 30 years.
    • Working mothers can retire earlier with shorter subscription periods.
    • Employees can purchase additional service periods if they have 25 years of actual service or 15 years if aged 60 or more, with a maximum of five years for both men and women.
  4. Pension Calculation
    • The pension amount is based on the average salary of the last six years of service or the entire subscription period, if shorter.
    • The rate is 2.67% of the pensionable salary per year for up to 30 years, increasing to 4% annually beyond 30 years, capping at 100% of the pensionable salary.
    • The minimum monthly pension is AED 10,000, with GPSSA covering any shortfall.
    • For service periods exceeding 35 years, an additional three months' salary per year is paid based on the pensionable salary.
  5. Investment of Funds
    • To ensure the growth of pension funds, the new law provides guidelines on the investment of pension contributions. These guidelines are designed to diversify the investments and minimize risks, thereby enhancing the fund's profitability and sustainability.

Implementation and Compliance

The Law aims to encourage the employment of UAE nationals and outlines the new contribution rates and guidelines for compliance. It is essential for companies to understand these changes to avoid fines and penalties. Contribution payments under this new law will begin on January 1, 2024.

One of the pivotal aspects of the new law is its inclusiveness. The coverage has been widened and expanded to include more sectors and categories of workers, including part-time and contract workers, ensuring that a larger portion of the workforce has access to pension benefits.

In Conclusion

Recognizing the mobile nature of today's workforce, the new law provides provisions for the portability of pension benefits. Employees changing jobs within the UAE can transfer their pension contributions to their new employers, which is a significant shift from the earlier system.

The law now allows employees to make voluntary contributions over and above the mandatory contributions, which provides an opportunity for individuals to enhance their pension benefits and plan more effectively for retirement.

The new UAE Pensions Law represents a significant step forward in the country's efforts to provide a more secure and sustainable financial future for its workforce. By introducing higher contribution rates, expanding coverage, and allowing for the portability of benefits, the law not only enhances the welfare of the employees but also contributes to the overall economic stability of the country. As the UAE continues to evolve its legislative framework, this law serves as a testament to its commitment to improving the lives of its residents and maintaining its status as a leading global economic hub.


ALKETBI team is highly skilled and frequently provides legal assistance specializing in sustaining employers and employees. For further insights and updates on employment law reforms, visit our website and social media platforms as it provides valuable resources and guidance for understanding the complex landscape of employment law in the region and beyond. If you request further guidance or you have concerns and queries, Let us know!

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