A new report has highlighted the urgent need for pension reforms in the UAE, following a workshop in the capital.
The Pension Systems in the Arab Region: Trends challenges and options for reforms report, published by the World Bank and Arab Monetary Fund (AMF), has called for changes to pensions systems across the MENA region.
Published as the result of a consultation with Arab countries, which took place in Abu Dhabi in January, the report warned that amendments are essential to ensure a sustainable economy.
The report states that current systems across the region target 80 percent of earnings before retirement, which is significantly higher than the 24 high-income Organisation for Economic Co-operation and Development countries, where pension replacement rates are around 57 percent.
In addition, projections show that the total amount of pensions already promised, known as implicit pension debt, is on average above 80 percent of the gross domestic product (GDP).
Government-led pension schemes were introduced for UAE nationals in the 1970s, but have not been updated since, and expat workers, which make up the majority of the workforce, rely solely on third party pension schemes which don’t contribute to the local economy.
With the upcoming introduction of excise tax and VAT, pensions could be the next area of economic reform undertaken by the Federal National Council to address the issue of an ageing population and ensuring a sustainable economy in the decades to come.