GPSSA: Purchasing the legal service period improves a pension rate upon retirement
Abu Dhabi, 11th March 2024: Purchasing a legal service period contributes to improving a pension rate upon retirement, since the goal of a purchase is to increase the pension rate beyond the minimum period eligible to receive a pension amount.
According to statistics released by the General Pension and Social Security Authority (GPSSA), the number of purchase requests from insured Emiratis from January to November 2023 reached 103.
It is important to note that both GPSSA’s Federal Pension Laws allow insured individuals to purchase an inactive employment period in addition to the actual service period in order to improve the pension rate upon retirement, noting that a purchase is not based on fulfilling the period required to obtain pension, or to fulfill the age requirement of 50 years that qualifies for disbursement.
The purchase is not based on fulfilling the period required to obtain the pension, nor the age that qualifies for its disbursement. The insured must be employed in order to be eligible to purchase pension, and this is based on the applicable federal law for the insured Emirati, namely: the purchase conditions for those covered under Federal Law. No (7) of 1999 state that the insured must have completed 20 year of employment, while Federal Law No. (57) of 2023, which applies to Emiratis working for the very first time since 31st October 2023 onwards, condition that Emiratis must have completed 25 years of employment.
If the insured’s employment period ends without him/her paying the full cost of the purchase, the purchased periods will be calculated based on the amounts actually paid. If the insured is deceased before completing payment, the pension installments will continue to be collected by his/her beneficiaries.
The purchase service is considered an optional service, so both men and women can purchase any number of years without the need to purchase the full term. Each year purchased however, gives the insured an increase of 2% in addition to the period of service required to purchase. There is no fundamental difference between the two laws in terms of rules and regulations for purchasing legal service periods.
Accordingly, if an insured person wishes to retire after 20 years of service in accordance with Federal Law No. (7) of 1999, he/she is entitled to a pension of 70% of the average contribution account salary. If a male buys the five-year period, his pension rises to 80%, while females receive 90% if they decide to purchase the full ten years.
The period of purchase may not exceed the period of obtaining the maximum pension which is due when the insured spends 35 years employed. As an example, if a female has worked for 33 years, she cannot purchase more than two years, while a male employee who has worked for 31 years, cannot purchase more than four years.
Purchase costs are calculated on the basis of the contribution account salary on the date of submitting the purchase request multiplied by 20% (which is the percentage of contributions from the insured and the employer/entity for the purchased period, multiplied by the period to be purchased in months). As an example, if an insured’s contribution account salary amounts to Dh20,000 and he/she purchases five years, the calculation for this will be as follows: Dh20,000 x 20% x 60 months = Dh240,000.
The full cost of purchase must be paid prior to the insured’s service, either all at once or in installments, with 50% of the total amount paid in advance and the rest in monthly installments, given that the installment period does not exceed four years or prior to the participant turning 60 years of age. Additionally, the value of the monthly installments must not be less than a quarter of the contribution account salary.
