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End of Service Benefit Reform
So... you lucky folks in the DIFC.
Rumour is from 2020, the EOS benefit will no longer be accrued and paid by your employer when you leave. It will be settled in cash each month... into a trust held by the government - they will kindly invest it for you and in return for this excellent work charge you around 1.5%. When you leave you will get the value of your investment back, which I expect to be at least a 2-3x* so all will be well. *the value of your investment may go down as well as down. |
Re: End of Service Benefit Reform
To be fair I think this is a good move, it means the company you work for is compelled to pay the gov your eos, they then take a percentage however you're guaranteed to get it (no more the company can't afford to pay you it).
As I see it anyway. |
Re: End of Service Benefit Reform
Originally Posted by IKnowNothing
(Post 12679913)
To be fair I think this is a good move, it means the company you work for is compelled to pay the gov your eos, they then take a percentage however you're guaranteed to get it (no more the company can't afford to pay you it).
As I see it anyway. |
Re: End of Service Benefit Reform
1.5% is eye watering. The expense ratio on my self managed portfolio is currently 0.22%.
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Re: End of Service Benefit Reform
Time to ask to cash it out early then
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Re: End of Service Benefit Reform
Originally Posted by IKnowNothing
(Post 12679913)
To be fair I think this is a good move, it means the company you work for is compelled to pay the gov your eos, they then take a percentage however you're guaranteed to get it (no more the company can't afford to pay you it).
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Re: End of Service Benefit Reform
Based on all the stories of the employer not being able to pay, I think it’s a good move. I have also heard of instances where employers have come up with questionable reasons to terminate employees and withhold their end of service. Some corrections to the above statement: 1. Money will be held in a trust but the investment choice will be managed by the employee based on available strategies and options. They are saying 10-12 options to start with. 2. The % charge includes administration charge and all fees in so there should be no extra fee. They are expecting the charge to go down further as part of the tender process. 3. An employer has the option to set up their own scheme provided the money is off the balance sheet and managed by a third party. This can only be a good thing as it guarantees you get your money and don’t loose it with your employer. 4. Employees will have the option to contribute themselves to use as a savings plan, if they choose to do so. 5. No localization requirements to start with and they money will be invested in global funds. Above information is based on what DIFC said in their info session, let’s see how it unfolds. Sometimes change is good, even in Dubai. ;) |
Re: End of Service Benefit Reform
Does this mean your final EOS will be smaller overall amount as it builds up over your service as a percentage of your salary at that time, rather than a multiple of your final salary?
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Re: End of Service Benefit Reform
Originally Posted by weasel decentral
(Post 12680787)
Does this mean your final EOS will be smaller overall amount as it builds up over your service as a percentage of your salary at that time, rather than a multiple of your final salary?
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Re: End of Service Benefit Reform
DIFC plan kicks in for all accruals post Jan 1 2020. Anything accrued before will still be the employers responsibility. Service will be frozen at Jan 1 2020 but the final calculation will be based on salary at time of leaving. Post January 1 2020 employers will need to make contributions equivalent to the end of service accrual based on service. For anyone under 3 years it equates to around 5.3% (equivalent of 21 days) of base pay and anyone over 5 years is around 8.3% (equivalent of 30 days). The selling point is it is cost equivalent as the employer should be accruing for end of service anyway, which in reality only a minority do. DIFC purposely stayed away from mandating old accruals as many companies will go bankrupt since they are using employee money to fund day to day operations. Hope this helps. |
Re: End of Service Benefit Reform
Originally Posted by shake2000
(Post 12680765)
Based on all the stories of the employer not being able to pay, I think it’s a good move. I have also heard of instances where employers have come up with questionable reasons to terminate employees and withhold their end of service. Some corrections to the above statement: 1. Money will be held in a trust but the investment choice will be managed by the employee based on available strategies and options. They are saying 10-12 options to start with. 2. The % charge includes administration charge and all fees in so there should be no extra fee. They are expecting the charge to go down further as part of the tender process. 3. An employer has the option to set up their own scheme provided the money is off the balance sheet and managed by a third party. This can only be a good thing as it guarantees you get your money and don’t loose it with your employer. 4. Employees will have the option to contribute themselves to use as a savings plan, if they choose to do so. 5. No localization requirements to start with and they money will be invested in global funds. Above information is based on what DIFC said in their info session, let’s see how it unfolds. Sometimes change is good, even in Dubai. ;) |
Re: End of Service Benefit Reform
Actually the fees quoted 1.25 -1.5% is all in with no additional fee and the government is not set to make any money from it. As per their statement DIFC plans to hire a tier 1 global consulting/ administration firm to manage the scheme, there will be no government involvement. The trust has to be local or in DIFC to comply with DFSA regulations and to make sure they can go after someone if things go wrong. The job of the trust, which will be independent of the provider, is to make sure they keep the provider on task. The trust will then be regulated by DFSA to make sure they are delivering as per promise and working for plan members.
The government benefit is that they might ,in future, ask a certain percentage of the money be invested in local markets but DIFC recognizes this is not possible today. Fund options will be the same as you get in global markets, very similar to how UK or other employer trust based schemes work. This is very similar to an employer provided plan with the exception your money is locked in until termination and not retirement age. Even at termination you will have the option to cash out or leave the money invested in the scheme. All of the above was shared at the DIFC info session last month. |
Re: End of Service Benefit Reform
Thanks for the info. That’s very clear. Are you advising them? 😁 |
Re: End of Service Benefit Reform
You are very welcome. Not advising but in the same industry so have to stay informed on the changes. Being neutral I think this is a great thing and will help attract talent considering the golden days are over and you’re now competing in the open market for talent. Time will tell. :) |
Re: End of Service Benefit Reform
Does that mean you don't get dinged for 2/3's of your EOSB if you resign?
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