Dubai International Financial Centre (DIFC)

Frequently Asked Questions

Q: Why change the existing system?

The existing system suffers from several key problems: (1) benefit payments are not secure (2) employers are exposed to open-ended liabilities (3) globally, the developed world is moving towards funded DC benefits.

Q: Why use a master trust?

Globally, best practice is to use a trust arrangement as this provides benefit security and a robust governance and operational framework.

Q: Is the scheme voluntary?

All DIFC employers and employees will be required to participate in DEWS unless an employer operates a qualifying system of their own.

Q: Can employers use their own system?

Employers can use their own end of service system as long as its contributions / benefits exceed DEWS and it is fully funded via a third party fiduciary arrangement.

Q: Who will pay for the cost of the new system?

DEWS’ costs will be met using an annual management charge levelled on invested assets, in line with global best practice.

Q: Can employers still provide a defined-benefit gratuity on leaving service?

DEWS sets out the minimum benefit basis. Similar to the existing system, employers can choose to top up DEWS benefits to equal a defined benefit amount.

Q: What are the investment options?

Employees will be given the option to set a high level asset allocation or use the trustee’s default investment option (set according to the employee’s risk appetite). A Shari’ah investment option will also be available. A proportion of assets may also be invested in local investment markets.

Q: What happens to existing benefits?

At the changeover date, benefits earned under the existing formula would stop earning new service, but would continue to be linked to future increases in Basic Salary. DIFC labour law requires that basic salary can be no less than 50% of regular earnings.

Q: How and when will benefits be paid under the new system?

Similar to the existing system, benefits will be paid when an employee leaves service. Under the new system, benefits will be paid directly to the employee in order to preserve benefit security.

Q: Can employees contribute to DEWS?

Employee will be able to make voluntary contributions to DEWS. Employer contributions will be mandatory.

Q: What will be the employer contributions to DEWS?

Contributions are expected to be cost neutral compared to the existing gratuity system. These have yet to be finalized but are expected to be around 5.83% of basic salary for where service is below 5 years and around 8.33 above 5 years of service.

Q: What happens when an employee leaves service?

For benefits earned under the existing end of service arrangement, the employer will continue to pay this part of the overall benefit. The employee can choose either to take their DEWS benefit at leaving service or defer divesting until a later date.

Q: When will DEWS be implemented?

DIFC intends for DEWS to commence from 1 January 2020.

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