Equiom’s Expertise in Retirement Planning and Workplace Savings Plans in the Middle East

Equiom has been providing trustee services to workplace savings plans in the Middle East for over 25 years. We use our extensive experience to help clients develop market-leading workplace savings schemes that benefit both employers and participating employees. This article is aimed to help Middle Eastern employers understand this evolving topic. For any questions, please contact Chris Cain. 

Considerations for designing a market-leading Workplace Savings Plan in the Middle East

In today’s competitive job market, employers in the Middle East are increasingly recognising the importance of workplace savings plans. Such workplace savings schemes not only help employees build long-term financial security but also serve as a valuable tool for attracting and retaining top talent. In a region where end-of-service benefits (EOSB) have traditionally been the main method of retirement provision, companies are now expanding their offerings with structured savings plans. When designing a workplace savings plan, it's important to consider how it complements long-term retirement planning goals for employees.

What does a good workplace savings plan in the Middle East look like? Here are the key elements from our perspective:

1.    Employer contributions and matching

A robust workplace saving scheme should include employer contributions – either as a fixed percentage of salary or through a matching mechanism for employee contributions. For example, an employer might offer a 5% contribution along with an additional 5% match if an employee also contributes 5%. This approach incentivises participation and helps maximise long-term savings*.

2.    Integration with End-of-Service Benefits (EOSB)

Traditionally, EOSB has been the primary financial cushion for employees leaving a company. A modern savings plan should integrate with, or enhance EOSB, ensuring that employees receive both a lump-sum payment and accumulated savings for improved financial security. Increasingly, companies in the UAE, Qatar, and Saudi Arabia are transforming EOSB into funded schemes rather than relying solely on unfunded liabilities. By integrating structured savings schemes with a clear retirement planning framework, employers can provide more support to their workforce beyond the traditional EOSB model.

3.    Flexible voluntary contribution options

A well-designed workplace savings plan should allow employees to adjust their savings rates in line with their financial circumstances. Whether it is a fixed percentage of salary, a set monthly amount, or the option to pause contributions during periods of hardship, flexibility improves both the attractiveness and sustainability of the scheme.

4.    Shariah-compliant investment options

Given the region’s demographics, many employees favour Shariah-compliant investment choices. A comprehensive savings plan should offer Islamic investment funds that adhere to Shariah principles, typically encompassing asset classes such as Money Market instruments, Sukuk, and Global Equities.

5.    Diverse investment choices

In addition to Shariah-compliant options, employees should have access to a range of investment funds aligned with their risk tolerance. These options can range from conservative money market or cash investment options and fixed-income funds to high-growth equity funds. A well-structured workplace savings plan should include a clearly defined default fund and provide guidance on investing strategies based on individual financial goals and risk appetite.

6.    Portability and vesting schedules

Employees in the Middle East often transition between countries while remaining with the same employer. A good savings plan should be portable, allowing employees to seamlessly transfer their accounts and investments across borders. Clear vesting schedules are also essential to indicate how employer contributions are earned over time, thereby aiding employee retention. This portability of savings and clear vesting schedules significantly enhance retirement planning, particularly for expatriate employees in the region.

7.    Low fees and transparent costs

Hidden fees can substantially erode savings over time. An effective workplace savings plan should offer cost-effective solutions with transparent fee structures covering administration, fund management, and transactions. Employers should negotiate favourable terms with financial institutions to ensure that employees receive optimal returns on their investments.

8.    Financial education and advisory support

Many employees may not be fully aware of the benefits of long-term savings. It is important for employers to offer financial education programmes, clear literature about the workplace savings plan, workshops, and access to advisory services, enabling employees to make well-informed decisions about their investments. Offering access to advisory services not only empowers employees to make sound financial choices but also plays a key role in effective retirement planning.

9.    Online access

It is vital for employees to be able to engage with their workplace savings plan around the clock. workplace savings plan administrators typically provide an online portal and mobile app featuring secure single sign-on through the employer’s network. These platforms should be intuitive and provide easy access to current valuations, transaction histories, fund switching options, monitor their investment performance, and beneficiary nomination details.

10.    Access to emergency withdrawals

While the primary aim of a savings plan is long-term security, employees may occasionally face unexpected financial needs. A well-structured workplace saving scheme should permit limited emergency withdrawals while still promoting the overall incentive to save for the future.

11.    Leaver options

In most Middle Eastern workplace savings plans, employees can access their investments upon leaving employment. They should have a range of options available, including full withdrawal, partial withdrawals, regular drawdowns, or the option to remain ‘deferred’ until a later date. It is important that employees understand these options and their implications.

12.    Regulatory Compliance and Governance

Workplace savings plans must comply with local labour laws and financial regulations. In several GCC countries, new regulatory frameworks are emerging – for example, the DIFC Employee Workplace Savings (DEWS) plan in Dubai – to govern employer-sponsored  employment money purchase schemes. Companies should ensure that their plans meet legal requirements and industry best practices. Regular review meetings between plan providers, employers, and trustees are essential to assess performance, address future developments, and align strategic objectives.

13.    Separate Independent Providers

A top-tier pension plan should engage independent companies for the roles of trustee, administration, and investment adviser. This separation is crucial to mitigate potential conflicts of interest. Historically, some schemes have combined trustee and administrator roles within one organisation, which increases the risk of conflicts – an approach that should avoided going forward.

 

Conclusion

A market-leading workplace savings plan in the Middle East seeks to enhance traditional EOSB schemes to offer employees enhanced financial security, flexibility, and potential for growth. By incorporating features such as employer contributions, Shariah-compliant options, flexible investment choices with transparent costs, and supportive financial education, companies can create beneficial employee money purchase schemes. Ultimately, these plans are designed to improve employee well-being and loyalty while ensuring that businesses remain competitive in today’s dynamic job market. At Equiom, we believe that workplace savings plans play a vital role in comprehensive retirement planning strategies, tailored to the needs of diverse and mobile workforce of today.

* Specific contribution levels may vary by employer and should be evaluated based on individual company policies

 

This article has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The article cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. This is not a financial advice, and you should seek your own financial advisor. Please contact Equiom to discuss these matters in the context of your particular circumstance. Equiom Group, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this article or for any decision based on it.

Equiom Fiduciary Services (Middle East) Limited is regulated by the DFSA. Any information contained herein is intended only for Professional Clients or Market Counterparties as defined by the DFSA, and no other Person should act upon it. Equiom Fiduciary Services (Middle East) Limited only deals with Professional and Market Counterparty Clients and does not hold a Retail endorsement. However, all employers and employees participating in the DEWS plan will be treated as Retail Clients under the DFSA requirements. Any underlying investment options made available within an EOS arrangement could potentially carry investment and market risk, whereby the value of the underlying investments can go down as well as up. The underlying assets within some investment options may be illiquid and or subject to restrictions on their resale. Participants in any solution should undertake their own due diligence and where necessary seek independent professional advice on the available investment options.
For information on the regulatory status of our companies, please visit equiomgroup.com/regulatory