The Global Pension Index ranks Netherlands at the top, while the US is in 22nd place and just ahead of the UAE. Image Credit: Shutterstock

Dubai: Ahead of a major upgrade to its end-of-service benefits program, the UAE’s existing pensions system was ranked in the 23rd spot in the annual ‘Global Pension Index’ put out by Mercer and the CFA Institute. This is the third time the UAE figures in the list, which ranks 47 countries and the schemes they provide. (These 47 countries make up 64 per cent of the world population.)

“The UAE has fared better than a number of more established global peers (in the latest index),” said Robert Ansari, Head of Investment and Retirement for the IMEA territory at Mercer, the financial services company. “Like many of its peers, the UAE is preparing for an increased population size entering retirement, necessitating a well-run and adequately provisioned pension scheme.”

The Netherlands, Iceland and Denmark topped the Global Pension Index, with the US ranked just ahead of the UAE in 22nd spot while the UK came in 10th.

Existing UAE scheme

Open only to citizens, the UAE’s retirement income system is a mix of ‘minimum means-tested state pension’ and an ‘earnings-related national employment-based scheme’ run by Abu Dhabi Pension Fund, the Sharjah Social Security Fund, and the General Pensions and Social Security Authority for the other emirates. (A ‘means-tested’ scheme factors in the individual’s family composition, income, etc.)

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Emirati employees contribute 5 per cent of their salary, and employers top that by 12.5–15 per cent of the salary, with the benefits guaranteed by the government.

“The UAE has put in place a sound structure for a funded pension system for Emiratis, with both the public and private sectors setting aside mandatory contributions during an employee’s tenure,” the Mercer-CFA Institute report finds.

“Progress is being made to implement a new retirement savings scheme targeted at supporting private sector employers and expat employees to plan for their financial future.”


This will be the decisive moment for the UAE’s shift from a ‘defined benefit’ to ‘defined contribution’, where using the latter method, employees can set aside what they want to provide towards their post-retirement financial planning. Currently, the vast majority of UAE’s expat employees come under gratuity schemes, with the employer contributing based on certain parameters.

How the UAE ranking came about
In being ranked 23rd in the Mercer-CFA Institute listings, the UAE had an overall index score of 62.5. The country scored 72.2 (17th globally) in adequacy, driven by the ‘generous’ retirement benefits with suitable minimum pensions relative to earnings.

The ‘positive scores around ‘sustainability’ are driven by the high labor force participation rate, especially for individuals over 55,” the report adds. “And due to the sound structure of a funded pension system with mandatory contributions set aside for the retirement benefit, with a score of 45.4 (33rd globally).

“The country was awarded for the integrity of its pension systems, 70.8 (30th globally), supported by the overall high degree of governance structure.”