Abu Dhabi’s Falcon mulls pension scheme for expats

UAE said to be in early talks to map out pension scheme for expats, to replace gratuities
Abu Dhabi’s Falcon mulls pension scheme for expats
Falcon Private Bank is owed by the government of Abu Dhabi
By Shane McGinley
Thu 26 Jan 2012 01:19 PM

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

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

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.”

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