The UAE needs to set up investment funds to manage retirement and end-of-service benefits for employees in the UAE, according to the director-general of the Federal Authority for Government Human Resources.
The new system will possibly include an enhanced gratuity system and private sector savings scheme which will help retain talent in the UAE.
"With accelerated global technological advancements and the increased retirement age and years of service, there is an urgent need in the region to establish investment funds to manage retirement and end-of-service benefits, which will provide a saving opportunity to all employees in the UAE and the regional labour markets," Abdul Rahman Abdul Manan Al Awar, director-general of the Federal Authority for Government Human Resources, said during the inauguration of the Workers Incentives and End of Service Benefits Conference in Dubai.
Anwar said creating saving schemes and funds is an important strategic step for the region, with leading UAE organisations such as Emirates airline following the practice.
A fifth of UAE companies face end-of-service liabilities of over $15m. With 88% of GCC companies surveyed having no plan to fund gratuities due, according to 2018 survey by global advisory and brokerage company Willis Towers Watson which covered 300 firms.
Out of all of them, only 20% said they offer a retirement or long-term savings plans for their employees.
"These funds will help employees plan properly by taking advantage of end-of-service benefits, enabling them to make use of their financial resources and creating jobs for new generations," he added.
The one-day conference, which brought together international and local speakers, discussed the challenges that the world, including the UAE, faced in this context.
According to Mercer, the gap between the value of pension benefits around the world and what pensioners really need to live a decent life is $70trn, which is more than the gross domestic product (GDP) of the world's 10 largest economies.
"A financial gap of this kind will lead to a ‘black swan' situation, which indicates a possible global financial crisis," a Mercer report said.
It is not currently mandatory for companies in the UAE to set aside payment for end-of-service gratuity. It is calculated as 21 days of pay per year of service for five years of service, and 30 days of pay per year of service thereafter. It does not, however, include allowances.