Less than 12 months after the Dubai International Financial Centre introduced a new way for its constituent employers to fund and secure employee benefits, the initiative has shown the potential to foster change in the approach to savings via the workplace.
Since February 2020, the DIFC Employee Workplace Savings plan has enabled 1,150 employers to meet mandatory end-of-service benefit liabilities on behalf of nearly 18,000 employees.
A key driver for change was the fact that very few employers were previously funding and setting ring-fenced assets aside for EoSBs. Although employers were accruing a growing liability, they typically used working capital to settle the benefit as it became due. Under the new DIFC Employment Law, it is mandatory for employers to make contributions to their EoSB liabilities and these are held in a trust for members’ benefits through DEWS.
More importantly, DEWS gives employees visibility; they can see their entitlement building up in their name and over time. Further, they can see the real-time value of this benefit online and can control how it is invested across a range of risk-rated, multi-asset funds, including Sharia-compliant options.
In short, DEWS has successfully turned an unfunded liability into a recognisable and secure benefit.
This was a timely initiative given the unexpected arrival of Covid-19. Among the many economic, financial and social knock-on effects of the pandemic, the savings shortfall among expat employees became clearer than ever before.
By highlighting the excessive reliance placed on end-of-service gratuity to meet both short-term and long-term financial needs, it has reinforced the need for flexible and cost-effective solutions such as DEWS to help employees develop a long-term savings mindset to fuel future planning, rather than just continuing to rely on the mandatory EoSG.
At a practical level, the ability to supplement the employer mandatory contributions into DEWS with employee voluntary contributions from payroll has kickstarted a “saving at source” culture that can create discipline and help employees accumulate additional wealth over time.
Expats seem to need this. This community is well-known for believing it won’t be located in the region for too long and, therefore, does not consider it a home for their retirement savings. As a transient workforce, it is often the case that when they move between companies, they use their EoSB payout to settle debts or meet short-term expenses.
Yet an increasing number of expats tend to remain here longer than they might plan to at the outset. In conjunction with the UAE’s recent measures to encourage expats to stay longer and new regulations to enhance transparency and value in financial services, we can expect a change in the attitude towards long-term savings and a stronger culture of financial preparedness. When this happens, it is critical that they can get easy and quick access to savings solutions, such as DEWS, that are suitable for their needs.
The DEWS plan is designed to align with global retirement savings standards and customised to meet the unique requirements of this region.
This makes it an excellent benchmark for the rest of the UAE – possibly even wider – to encourage long-term financial planning for expats driven by consistency and a regulated, best-in-class solution. It fosters financial stability by reducing employers that have an open-ended liability towards EoSBs.
As a transient workforce, expats use their end of service benefits payout to settle debts or meet short-term expenses
The current success of the DIFC initiative and DEWS can be attributed largely to the simplicity of the plan and the digital enablement that allowed a seamless onboarding of a large population of employers and employees over a short period of time. A user-friendly employer portal, member portal and member app helps enhance engagement and encourages use of DEWS.
As we move forward, this level of efficiency, transparency and digitalisation will be critical. The solution for the wider UAE has to align with the government’s vision for its future as a “digital nation” – one that not only utilises technologies to simplify and enhance, but also innovates and attracts talent.
Reena Vivek is the senior executive officer and managing director of Zurich Workplace Solutions
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The five pillars of Islam
1. Fasting
2. Prayer
3. Hajj
4. Shahada
5. Zakat
Electric scooters: some rules to remember
- Riders must be 14-years-old or over
- Wear a protective helmet
- Park the electric scooter in designated parking lots (if any)
- Do not leave electric scooter in locations that obstruct traffic or pedestrians
- Solo riders only, no passengers allowed
- Do not drive outside designated lanes
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THE BIO
Bio Box
Role Model: Sheikh Zayed, God bless his soul
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Favorite quote: To be or not to be, that is the question, from William Shakespeare's Hamlet
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Favorite movie: Braveheart
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ETFs explained
Exhchange traded funds are bought and sold like shares, but operate as index-tracking funds, passively following their chosen indices, such as the S&P 500, FTSE 100 and the FTSE All World, plus a vast range of smaller exchanges and commodities, such as gold, silver, copper sugar, coffee and oil.
ETFs have zero upfront fees and annual charges as low as 0.07 per cent a year, which means you get to keep more of your returns, as actively managed funds can charge as much as 1.5 per cent a year.
There are thousands to choose from, with the five biggest providers BlackRock’s iShares range, Vanguard, State Street Global Advisors SPDR ETFs, Deutsche Bank AWM X-trackers and Invesco PowerShares.
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Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
Desert Warrior
Starring: Anthony Mackie, Aiysha Hart, Ben Kingsley
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MWTC info
Tickets to the MWTC range from Dh100 and can be purchased from www.ticketmaster.ae or by calling 800 86 823 from within the UAE or 971 4 366 2289 from outside the country and all Virgin Megastores. Fans looking to attend all three days of the MWTC can avail of a special 20 percent discount on ticket prices.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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Price, base: Dh315,000
Engine: 3.0-litre V6
Transmission: Seven-speed automatic
Power: 335hp @ 5,000rpm
Torque: 500Nm @ 1,370rpm
Fuel economy 5.9L / 100km
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Crops that could be introduced to the UAE
1: Quinoa
2. Bathua
3. Amaranth
4. Pearl and finger millet
5. Sorghum
