DC plans UAE guaranteed investment

With the growing interest in Defined Contribution (DC) plans in the UAE and across the Middle East region, this paper explores expectations versus reality and shares insights for potential investors to consider.

In February 2020, the DIFC launched a mandatory Defined Contribution (DC) savings plan (called the DEWS Plan) to transform the way end-of-service-benefits (EOSB) were managed and to drive a culture of long-term savings that is aligned to global best practice. The DEWS Plan’s success has since led it to being chosen by the Government of Dubai as the mechanism to deliver its savings scheme initiative for its expatriate employees.

In October 2023, the UAE’s Ministry of Human Resources & Emiratization (MOHRE) released a Federal Cabinet Resolution1 announcing the introduction of Elective Alternative DC Schemes to replace the end-of service system in the UAE. Both the DEWS Plan and Elective Alternative Schemes are Defined Contribution (DC) plans, and these differ significantly from the prior Defined Benefit (DB) end-of-service system that they replace. One of the main differences is that in a DC plan, investment risk is borne by the employee rather than the employer.

These developments within the UAE have given rise to a growing interest in DC plans across the region. With this increased interest, a common question we encounter is whether ‘guaranteed’ investment options have a role to play within DC plans.

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