The financial landscape in the Middle East – especially in the UAE, is undergoing a remarkable transformation driven by the imperative to adapt to shifting demographics and the ever-evolving economic needs of its diverse population. While the region has traditionally relied on family support systems and state-sponsored benefits, the rapid digitalisation, the demographic situation, and the influence of the Western financial systems propel the industry towards a new era.

There are a few reasons that have led to the UAE’s surging interest in improving pension planning and participation. For instance, over the past decades, the country has been experiencing unprecedented demographic shifts due to an influx of expatriate workforce.

In 2023, the expatriate population in the UAE totalled around 88.52%, i.e., nine million, while the nationals only amounted to 11.48%, i.e., 1.17 million. There are various reasons for this, such as the growth of the private sector, abundant job opportunities, the absence of income tax and the high standard of living.

Today many expatriates save for retirement while working in the UAE without help from financial institutions, presenting a massive opportunity for the region’s financial sector. On one side, the UAE must navigate the challenging task of charting an attractive and inclusive pension planning system paving the way for the industry from scratch. On the other hand, the absence of outdated infrastructure, coupled with the abundant availability of technology, global expertise and experience, places it in a favourable position to harness global best practices.

The emergence of digital pension planning in the UAE is a significant step towards democratising access to this service, empowering individuals to assert control over their retirement. As digital business models gain more trust and prevalence, it is interesting to explore how they might influence the financial landscape of the region.

Ongoing regulatory support
Governments in the UAE have already started taking steps to provide pension services for its residents and citizens. It has introduced various initiatives to support and promote the cause. This regulatory support can provide a conducive environment for the growth and adoption of the region’s pension planning services.

• As part of the UAE’s Pension Authority’s goal to spread awareness about the pension law while supporting Emiratis to plan for their future from now, the General Pension and Social Security Authority (GPSSA) launched the ‘Get Ready - Proactive Financial Planning’ campaign, which offers individuals the relevant information they require to proactively plan their pre-retirement, early retirement, mid-retirement, and late retirement stages.
• The savings company owned by the Investment Corporation of Dubai, National Bonds, launched a golden pension planning scheme in the UAE in a move to ramp up financial planning solutions for nationals and expatriates. The scheme allows employees to bridge the savings gap and better plan for their retirement needs as their end-of-service benefits are invested in assets such as real estate and money markets, which can be monitored on its mobile app, enabling their savings to grow.
• The DIFC Employee Workplace Savings initiative was implemented in 2022 by His Royal Highness Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, Crown Prince of Dubai, in his position of Chairman of the Executive Council where expatriates working in the public sector were given the opportunity to increase their savings and end-of-service benefits.

Looking at the increasing number of policies to help employees with financial planning and pensions, it is unsurprising that the UAE ranked 25th in the global pension indicators in a Mercer Institute report – which included 44 global pension systems – equivalent to 65% of the world’s population.

Corporate pension plans: bridging the retirement planning gap
Despite ongoing efforts, today, most of the population remains outside the purview of retirement services even after working in the UAE for many years. Employees depend excessively on their end-of-service gratuity, and as a result, as reported by the insurance company Friends Provident International found, 45% of UAE residents have yet to start saving for retirement. This reflects that residents are living beyond their means, spending more, saving less, and relying on credit to finance their lifestyle, which will eventually result in a struggle to maintain their standard of living once they retire.

Undoubtedly, pension planning needs to be more accessible to a broader audience, and companies need to partner with technology providers to provide personalised financial advice.

Of course, corporations could help employees plan their retirement by encouraging them to consider corporate pension plans – as part of an overall strategy to encourage financial well-being. Instead, of using an external tool, employees could visualise how their savings and investment choices will impact their financial situation under different economic circumstances via a tool that could be integrated with your existing accounting system. This is where digital tools such as OutRank® come in to enable employees to have more control over their pension journeys and navigate through the intricacies of retirement planning.

Of course, this is a great opportunity for the region’s insurers to provide corporate pension planning products. OutRank® can enable them to help employees assess whether, for instance, they should increase their tax-deductible pension contributions or start an additional private pension pot. Ultimately, corporate pensions foster improved employee loyalty and retention for firms and an additional opportunity for life insurers.

Securing a safe retirement and financial health in the UAE
Clearly, digitalisation can lead to increased efficiency, reduced costs, and improved service delivery – whether in investments, wealth management or pension planning. With OutRank®’s data-driven analytics, the residents can get personalised advice based on their financial decisions, preferences, and beliefs.

Financial institutions in the UAE partner with financial analytics firms to provide valuable insights on consumer finances to a broader segment of the population – those who previously lacked access to such services. For instance, HAYAH Insurance partnered with Kidbrooke® to help its clients improve their financial health. They have been using OutRank® to forecast clients’ cash flows and determine investment amounts required to fulfil their goals. In the future, the insurer plans to integrate the technology for the full spectrum, including retail insurance-based savings, investments, and pensions, to make the journey highly digitalised, personalised and accessible.

The UAE stands on the cusp of a financial evolution as it reconciles its unique demographics with the pressing need for comprehensive pension planning. Drawing on technological advancements and global best practices, the region is poised to offer transformative solutions to its vast expatriate population and locals alike. As innovative platforms like OutRank® continue to bridge the knowledge gap, fostering financial literacy and empowerment, the UAE’s financial landscape has a good chance of becoming a benchmark for pension planning in the digital age.

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