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GPSSA: The benefits transfer regulation ensures legislations’ alignment with UAE Vision 2021

21 August 2019

GPSSA: The benefits transfer regulation ensures legislations’ alignment with UAE Vision 2021

Abu Dhabi Aug 21, 2019:  The General Pension and Social Security Authority (GPSSA) confirmed that the draft benefits transfer regulation ensures legislations’ alignment with UAE Vision 2021 as the regulation contributes to achieving the sub-objective “well-rounded lifestyle” which falls under the fourth element of Vision 2021 “United in Prosperity”. Implementation of this regulation will facilitate Emirati employees transitions between different employers in the State by considering their service period continuous without interruption which allows them to join their service periods without having to pay joining fees which vary from one pension law to another, granting them the best end of service benefits, most important of which is pension.

 GPSSA stated that this regulation is one of the public initiatives under GPSSA’s strategic goals aiming to provide unique retirement services to the different groups of customers thus contributing to a higher happiness meter for the State’s citizens.

According to GPSSA, the regulation aims to address cases of Emirati employees’ transfer and movement from the federal sector to the private one or from the military sector to the civil one or vice versa. Neither civil nor military pension laws in the State have regulated the matter of insured Emiratis moving between employers subject to different pension laws. Previously, when an employee wished to move from a sector subject to a certain pension law to a sector subject to another and wished to join his previous and later service periods, the law governing the sector to which he is moving would determine how such move would take place and joins the service periods according to its provisions. Under the new benefits transfer regulation, a unified approach will be followed in relation to the transition process in that the insured’s service period shall be considered ongoing and continuous.

 As for most laws covering the issue of moving and joining, GPSSA stated that the provisions providing for joining the previous service periods for Emirati employees differed in each law in terms of whether or not to consider their entire services connected to each other. Furthermore, joining previous service periods was limited to such periods which merit for benefits, not to mention that the end of service benefits to which the employee who moved to a federal civil sector is entitled under the Pension and Social Security Law No. (7) of 1999 are not enough to cover the joining fee which impelled some employees to refrain from joining their previous service periods, possibly due to the heavy cost. This results in losing such periods and not calculating them for pension purposes, despite the option to pay the joining fee on instalments. 

Realizing the importance for legislations that provide for a comprehensive mechanism for moving, the Government covered such mechanism in the amendments to the Pension Law issued under Federal Law No. (6) of 2006. Article (3) bis of the amended Law stipulates that GPSSA shall be mandated with the development of a regulation for benefits transfer between pension funds operating in the State and for such regulation to be ratified by a decision of the Cabinet.

As moving cases from the federal sector which is covered under the Pension and Social Security Federal Law No. (7) of 1999 and the amendments thereto continued and seeing as there is no integration between the different social security regulations in a manner that allows for the transfer of benefits in case of employees transition between sectors governed by different such regulations, the Government kept in mind that the transition decision could entail negative consequences for employees. 

Noting that transitions could yield negative consequences such as depriving Emiratis from receiving the best pension upon retirement due to dividing service periods between different pension funds, which limits their ability to obtain a better income and elevate the standards of living for themselves and their families and realizing the obstacles faced by people trying to transition between the federal and local sectors on the one hand and the civil and military sectors on the other thus not utilizing citizens experience and competencies and not particularly encouraging employees to continue working for as long as possible since the social security regulations do not allow them to join their service periods, the Government concluded benefits transfer agreements to address the transition cases until it develops a suitable mechanism to assess and transfer the pension’s capital value between different funds through legislative amendments to the Federal Pensions Law, Abu Dhabi Pensions Law and the Military Pensions Law and setting the basis for evaluating and transferring the value with the help of a consulting actuary.

In order to address cases of social security benefits transfer between the different pension funds operating in the State, GPSSA has coordinated with all the pension funds in the State to roll out the regulation to all pensions-related entities in the State. This regulation targets pension funds operating in the State and employees of employers subject to pensions laws managed by such funds as well as employees transitioning between different employers in the State and pensioners who return to work. The regulation excludes transitions that were settled according to private understanding agreements concluded before it came into effect.

The regulation outlines methods for addressing transitions for the purpose of considering the previous service period connected with the later service period regardless of whether or not such transition was at the request of the new employer or at the employee’s own discretion.

The positive impact of this Regulation is manifested in many respects, the most important of which is the positive legislative effects that could facilitate Emirati employees’ transition between employers who are subject to different pension regulations. It also has positive effects from a social perspective as it allows Emirate employees to obtain better social security benefits, especially pension since all different service periods are calculated for the purposes of calculating pension or benefits. The regulation’s economic impact can also be witnessed through the psychological stability enjoyed by workers in the labour market which enhances their productivity.

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