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Thu 14 Nov 2019 09:48 AM

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UAE end of service benefits changes on the cards, according to Zurich report

75% of companies do not set aside 'ring fenced' assets to cover their end of service benefits liabilities

UAE end of service benefits changes on the cards, according to Zurich report

End of of service benefits in the UAE to be replaced with workplace savings plans similar to those launched by DIFC.

End of of service benefits in the UAE could soon be replaced by more conventional workplace savings plans employed by companies throughout the world.

According to the latest 2019 End of Service Benefits report by Zurich in the Middle East and Insight Discovery, 75 percent of companies do not set aside ‘ring fenced’ assets to cover their end of service benefits liabilities and make these payments from their operating cashflow.

And of those that do set assets aside, 78 percent do not make these visible to employees.

Earlier this year, Dubai International Financial Centre (DIFC) launched its Employee Workplace Savings (DEWS) plan, offering a low-cost investment platform for receiving and managing mandatory end-of-service contributions on behalf of employees - similar to the pension system operated in the United Kingdom.

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Employees can also add any voluntary savings, including cash or cash equivalent options, for those who do not want to take investment risks with their contributions.

Through the report, 81 percent of companies revealed they would be open to change, believing that a mandatory funding requirement would be positive.

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Reena Vivek, senior executive officer of Zurich Workplace Solutions, said: “Feedback from financial executives in the region reveals a real need for funded and professionally-managed, defined contribution plans that incorporate a voluntary savings component for employees.

“2019 is predicted to be the dawn of a new era for end of service benefits in the UAE. We should expect to see greater disclosure about the size of end of service benefits liabilities and an increase in employee education about the benefits of workplace savings.

“The DEWS plan combined with growing support for reform by various government bodies will likely see a wave of improved employee benefit structures for companies large and small in the region.”

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