The Dubai International Financial Centre’s (DIFC) savings scheme for workers has seen assets under management surge to $127 million in its first year.
Launched in February 2020, the DIFC Employee Workplace Savings (DEWS) Plan has so far registered 19,182 individuals working for 1,187 companies at the tax-free zone. A substantial number of staff have also chosen to make extra voluntary contributions from their salaries into the scheme.
The scheme works as an end-of-service benefits plan for employees based at the zone.
It enables workers to contribute a portion of their salaries to a funded and professionally-managed defined contribution savings plan.
Foreigners who choose to work in the UAE are not part of any government-run pension system.
Expatriates are only entitled to end-of-service benefits, also known as gratuity or severance pay which, in many cases, is not sufficient to meet retirement needs.
“DEWS aims to address a key issue with end of service (EOS) benefit system in the Middle East where employers are not obliged to fund their EOS liability externally. Most companies therefore tend to make EOS payments from company cashflow, meaning that employees are not protected against employer insolvency,” said Chris Cain, client services director for Middle East at Equiom.
“DEWS has addressed this issue and as part of the scheme, once funds are paid on behalf of employees, the sum is ring-fenced and is no longer a liability of the employer, making it safer for employees.”
Employees who are enrolled in the plan are able to decide on the investment option that best fulfils their personal requirements, with five different risk-graded options and a Sharia-compliant option available.
As of January 2021, most of the assets in the savings scheme, about 75 percent, remain invested in the low/moderate growth fund, which is the default fund of the DEWS Plan.
About 20 percent of the assets are split across the other growth fund options, including moderate growth, moderate/high growth and high growth funds.
(Writing by Cleofe Maceda; editing by Seban Scaria)
Disclaimer: This article is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Read our full disclaimer policy here.
© ZAWYA 2021