UAE’s retirement income system improves global score

UAE now ranks 23rd globally in Mercer pension index

A view of the Dubai skyline.

The UAE’s retirement income system has improved its score for the fourth year in a row, a study showed on Wednesday.

According to the 16th annual Mercer CFA Institute Global Pension Index (MCGPI), the UAE’s index value increased from 62.5 in 2023 to 64.8 in 2024, primarily due to the introduction of a minimum access age to receive benefits, which was announced in November 2023. In particular, the UAE retirement system saw improvements in adequacy, with a score of 77.1, to rank 12th globally in 2024, driven by the country’s generous retirement benefits. It also improved its score for the integrity of its pension systems, 75.3 (25th globally), supported by the high degree of governance structure.

Overall, the score sees the UAE rank 23rd in the study, in the same grade category as countries with long-established robust pension systems such as the United States, and alongside regional peers such as the Kingdom of Saudi Arabia.

The UAE’s retirement income system comprises a minimum means-tested state pension and an earnings-related national employment-based scheme administered by Abu Dhabi Pension Fund for the Emirate of Abu Dhabi, Sharjah Social Security Fund for the Emirate of Sharjah and the General Pensions and Social Security Authority for the rest of the emirates. Employees contribute 5% of salary, and employers contribute 12.5%–15% of salary, with benefits guaranteed by the government.

According to the report’s authors, the overall index value for the Emirati system could be increased by increasing the coverage of employees in occupational pension schemes, thereby increasing the level of contributions and assets; improving the required level of communication to members from pension arrangements; increasing the state pension age as life expectancies rise; and reducing the level of household debt.

Tarek Lotfy, President, Mercer India, Middle East, and Africa said: “The UAE is taking a far-sighted approach to the sustainable development of its pension system, preparing for longer life expectancies and for an increased number of people reaching retirement age, which will necessitate a well-run and adequately provisioned national pension program.”

Claudia Maldonado, Head of Savings and Pensions, Mercer Middle East added, “The UAE has recognized that there is a global trend of moving away from defined benefit (DB) plans and shifting towards defined contribution (DC) arrangements and is taking the necessary steps to safeguard and support the needs of tomorrow’s retirees by encouraging increased flexibility and personalization.”