UAE's National Bonds to launch 2 end-of-service investment schemes

Dubai: National Bonds will launch two investment products that would allow companies in the UAE to park funds meant to be give out to employees as end-of-service payments.

One of the National Bonds’ new funds will be a capital protected scheme, where employer provided funds will be used in bank deposits and into sukuks (Islamic debt programs) issued by local or federal governments. These typically come with higher credit rating, ensuring due protection for the funds invested. These would typically offer returns of 3%-4%.

The second launch targeted at end-of-service schemes is a ‘balanced growth fund’, where employers can decide to participate. Their employees too can put in monthly contributions if they so choose to do so. The projected returns from the fund would be 5%-7%.

“National Bonds is one of 5 asset managers approved by the Ministry of Human resources and Emiratization to play a part in the UAE’s end-of-service benefit program,” said Mohammed Qasim Al Ali, CEO of National Bonds.

“We have been in talks with employers on the capital guaranteed scheme, which targets companies with sizable blue-collar workforces. The balanced growth fund is more aimed at companies with a white-collar employee base. I think we will be ready to launch after regulator approval in 2-3 months.”

The UAE is recasting its gratuity or end-of-service benefit scheme to operate in step with trends in the global pensions marketplace. Employees at public sector companies and in financial free zones already have the choice to make periodic contributions over and above what their employers pay towards their gratuity funding.

“These are essentially ‘defined contributions’ by the employee with a mix of ‘defined benefits’ built in,” said Al Ali. “Defined benefits because the employer is still bound to pay a certain percentage based on the length of service put in by the employee.

“At the end of the day, it’s up to the employer to decide whether they want to sign up for the National Bonds’ schemes or not.”

Will still target individuals

National Bonds will continue to offer investment schemes meant for individuals, the CEO said. “The investment climate is favourable with more people wanting to start on their savings plans earlier than they used to,” said Al Ali.

In 2024, it recorded a 51% increase in regular savers, and that added up to an investment portfolio surging to Dh15.8 billion. That’s 22% higher than in 2023.