The UAE has moved up two places in the ranking of pension systems around the world.

The Mercer CFA Institute Global Pension Index for 2023 placed the UAE in the 23rd position among 47 countries, climbing two places from 25th last year.

The index rates pension systems around the world based on adequacy, integrity and sustainability.

It highlights some shortcomings in each system and suggests possible areas of reform to provide more adequate and sustainable retirement income to beneficiaries.

This year, the UAE gained an index value of 62.5, up from 61.8 last year.

However, the improvement in the UAE’s ranking is “primarily due to a correction relating to last year’s data”, the index said.

Overall, the Netherlands topped this year’s index with the highest overall index value of 85.0, closely followed by Iceland (83.5) and Denmark (81.3).

At the bottom of the index is Argentina, with an index value of 42.3.

UAE’s pension system

The UAE retirement income system comprises a minimum means-tested state pension and an earnings-related national employment-based scheme administered by the Abu Dhabi Pension Fund for the UAE capital, Sharjah Social Security Fund for the emirate of Sharjah and the General Pensions and Social Security Authority for the rest of the UAE.

Workers contribute 5% of their income, while companies contribute 12.5% to 15% of salary, with benefits guaranteed by the government.

According to the index, the ranking of the UAE’s pension system index could improve by the following:

  • Introducing a minimum access age so that the benefits from pension plans are preserved for retirement purposes
  • Increasing the level of assets held in private pension arrangements to reduce the reliance on state pensions in the future
  • Improving the required level of communication to members from pension arrangements
  • Increasing the state pension age as life expectancies rise

(Writing by Cleofe Maceda; editing by Seban Scaria)

(seban.scaria@lseg.com)