A new end-of-service saving and investment initiative launched by the UAE government on Monday will strengthen residents’ job security as well as ensure their financial stability, experts have said.
The UAE Cabinet on Monday announced a new system — which is optional — for employees working in the private sector and free zones to invest their end-of-service gratuity.
The Securities and Commodities Authority and Ministry of Human Resources and Emiratisation will oversee the allocations of the fund to ensure that funds are invested responsibly.
Moreover, public sector employees can also join the initiative.
According to findings of the 12th edition of the National Bonds Savings Index, a large number of employees — 82 per cent — in the UAE are open to employers investing their end-of-service benefits.
As a result of this initiative, employees will not just earn decent returns on their investments but it will also benefit the local economy as billions of dirhams will be channelled into various sectors.
“We are confident that the recently approved optional system for end-of-service gratuities by the UAE Government will increase the attractiveness in the UAE’s labour market and will strengthen job security. Furthermore, it will empower individuals and corporations to invest in their future and support corporates with employee retention strategies,” said Mohammed Qasim Al Ali, Group CEO of National Bonds, a UAE-based Shariah-compliant saving and investment company.
He added that the programme will ensure that the funds are “safely invested in order to guarantee their rights and to achieve the stability of their families.”
More avenues
Experts also advised residents to not use up their end-of-service lump sum amount, and to invest it further.
Highlighting different options that are available to UAE employees to invest their end-of-service funds, George Pavel, general manager at Capex.com Middle East, said there are multiple options to invest one’s capital in mutual funds, individual stocks, gold, or bonds.
“Each option provides different characteristics, and risk and reward profiles and can be accessed through a bank or broker in most cases. In this regard, they can offer varying investment opportunities and the ability to diversify by creating a portfolio of assets for example. While there are many opportunities to invest in global financial markets, the UAE offers interesting investment opportunities as well,” said Pavel.
He advised individuals that the return on investments from different asset classes can change drastically depending on market conditions and the nature of the assets.
“Choosing where to invest one’s money has to be made with care. Global factors can also have a significant impact on returns. Currently changing interest rates and global economic and geopolitical risks affect the stock market, bonds, gold, and other assets and could create opportunities as well as risks. While higher risks could lead to higher rewards in certain cases, they could also result in significant losses in others.”
Pavel pointed out that having a long-term view of the market could also help comprehend how investments could behave and how they could impact one’s financial well-being.