Abu Dhabi’s Falcon mulls pension scheme for expats

Falcon Private Bank, owned by Abu Dhabi's Aabar Investments, plans to develop pension schemes aimed at the UAE’s more than seven million expatriate workers, a senior executive said.

The Swiss bank offers pension schemes in other countries that allow employers and staff to both pay into a retirement fund, and is considering launching a similar plan in the UAE.

“We’ve been operating international retirement solutions or plans for over two decades within other markets” said Damian Hitchen, director and relationship manager at Falcon’s Dubai office.

“It is at the research and development. We are researching what the requirements will be here locally and we will tailor our proposition. How long that will take, we do not know right now.”

The UAE was in October reported to be in early talks with the World Bank to map out a pension plan for foreign workers that would see employers pay a portion of annual salaries into a fund.

The proposed plan could signal the end of a 40-year gratuity scheme that required firms to provide end-of-service payouts to staff, calculated on the length of the contract and basic salary.

Saudi Arabia has no cap on the total amount employees can receive while the UAE and Kuwait cap payouts at equivalent to two years’ pay.

Expatriates had expressed concern over the replacement of gratuities with pension plans, questioning what would happen to the funds should they return home, or move abroad. But Hitchen suggested the money could potentially be accessed as a nest egg, at the end of the contract.

I think the default situation will be that when you terminate your employment you will be able to access your money in a lump sum,” he said. “The increased stay here has made people think about their retirement.”

The UAE’s early-stage pension scheme was described as a “work in progress” last year by Dubai’s Department of Economic Development (DED), which attended a roundtable on the subject.

“We do have a starting point of about eight percent contribution of basic salary from the employer,” said Harun Kapetanovi, of the DED.

Kapetanovic said the capital would not be used to fund government development projects, but would aim to “enhance the welfare of expatriates”.

A pensions plan could raise hundreds of billions of dollars in capital, which could be used to help grow the UAE’s fledgling asset management and boost local bourses, Nigel Sillitoe, chief executive of research firm Insight Discovery, said last year.

 “I think it is the biggest opportunity for financial companies in the GCC. Not many of them are aware of the changes but it will be the big story over the next couple of years,” he said. “They are struggling to raise investments… clearly this will represent opportunities.”