Articles

Abu Dhabi, 14th May 2024:  New Emirati employees who have registered with the General Pension and Social Security Authority (GPSSA) for the first time from 31st October 2023, as per Federal Law No. (57) of 2023, receive 2.67% of the pension account salary for each year within the contribution period. Once an insured reaches 30 years of contributions, that rate further increases each year by 4% until it reaches a maximum of 100% of the pension salary.


Insured Emiratis must be aware of the rules, provisions and terminologies governing the pension law in order to be able to calculate their retirement pension for an actual or hypothetical period. For that purpose, the GPSSA has launched the ‘Know Your Law’ awareness campaign in the beginning of the year, in order to raise awareness and information regarding pension and social security and their services. 


An electronic calculator is also available in GPSSA’s website in order to help facilitate the required calculation for the insured, however the insured must enter accurate numbers into the calculator in order to obtain correct results, which requires being aware of account salaries and the differences between them. GPSSA explains in detail. 


What is a contribution account salary?


The contribution account salary is the first and most important process by which contributions are calculated and pension benefits are paid; additionally, the contribution account salary determines the required amount to be deducted from the insured’s monthly salary.


For Emiratis working in the government sector, the contribution salary is based on the insured’s basic monthly salary, cost of living allowance, social allowance for children, social allowance for the citizen, as well as housing allowance, provided that the contribution account salary does not exceed AED 100,000.


For Emiratis working in the private sector the contribution account salary is based on the salary determined as per the employment contract, provided that the contribution account salary is not less than AED 3,000 and does not exceed AED 70,000.


The contribution account salary for insured Emiratis who work in any of the regional, international missions or are foreign politicians working in the UAE, is calculated on the basic salary as specified in the employment contract, in addition to benefits, bonuses or allowances that are granted during the employment duration.


What does the term average contribution calculation salary refer to and how is it calculated?


This is the second most important term to understand, since it includes calculating the retirement pension for employees working in the government and private sectors, as well as those working in diplomatic or political missions during the last six years of the contribution period, or for the entire contribution period if it is less than that. 


The value of the average contribution account salary is calculated by multiplying the contribution account salary for each of the last six employment years, by 12 months. The amount is then compiled and divided by 72 months. 


What is a pension salary and how is it calculated?


The pension calculation salary is the total amount given to insured Emiratis once they are ready to retire and receive their pension. The entitled percentage is calculated based on the number of years the insured has spent working.  


As mentioned in the beginning of this PRL, pension is calculated at the rate of 2.67% of the pension account salary for each year within the contribution period. Once an insured reaches 30 years of contributions, that rate increases annually by 4% until it reaches a maximum of 100% of the pension account salary. As an example, if we assume that an insured has spent 33 years working and has a contribution account salary of AED 60,000 with an average contribution account salary of AED 39,000 for the last six years, the pension amount for the first 30 years is calculated at the rate of 80% for each year (i.e. pension is calculated at a rate of 2.67% for each of the 30-year contribution period. 


If the insured has spent more than 30 years employed, pension is calculated at the rate of 4% annually, meaning that if the insured has spent three more years after the 30-year period working, the pension amount is calculated at an extra 12%, meaning that the total pension percentage according to this hypothesis is 92% of the average contribution account salary. This percentage is equivalent to AED 35,000, which the insured receives upon retirement.


It is important to note that the method and provisions to calculate pension differs based on the ministers, council of ministers and representatives, in addition to the difference in the maximum salary when calculating contributions and Article (20) of Federal Decree Law No. 57 of 2023, which clarifies these provisions.