Trends and Challenges: The GCC’s Shift to DC Plans

As the Gulf Cooperation Council countries push forward with economic modernization, the shift from end-of-service gratuity to Defined Contribution retirement saving models is gaining momentum. With this transformation comes a new set of challenges, while also opening the door to a future of portable, investment-driven retirement benefits. This article takes a closer look at how the region is navigating this complex but critical journey.

As we wrote in Why the Gulf States Are Ready for Defined Contribution, Gulf Cooperation Council (GCC) countries have been taking steps to transition from traditional end-of-service gratuity systems (EOSG) to Defined Contribution (DC) models. This shift is being driven by the need for more sustainable, transparent, and portable retirement benefits, especially as the region seeks to align with global best practices.

Momentum is Growing …

A survey conducted by in 2024 by Smart revealed that 60% of expatriates in the UAE, Saudi Arabia, and Qatar found the existing EOSG payments insufficient for their retirement needs. This sentiment underscores the importance of reforms to maintain the region’s attractiveness to international talent – many of whom will have come from regions where DC models are widely available, if not the norm.

Another new survey, this one from National Bonds, a UAE Sharia-compliant savings and investment company owned by the investment arm of Dubai Government, found that retirement remains the top financial goal among UAE residents. What’s more, the younger generation are more financially aware and feel more confident about retirement than ‘Gen X’ – the cohort currently nearing or in retirement. That’s an encouraging sign for increased participation in future schemes.

Reforms in the macro environment are also helping pave the way for transformation. GCC countries have been modernizing their legal frameworks to foster innovation and ensure economic stability. These reforms are part of broader strategies to enhance global competitiveness and may impact labour laws, including those related to retirement benefits. In February 2025, discussions emphasized the need for the GCC to diversify economies and enhance resilience. In her opening remarks at the World Government Summit 2025 in Dubai, International Monetary Fund Managing Director Kristalina Georgieva noted: “The GCC has been a bright spot in the world economy…This success did not happen in a vacuum. GCC countries have been doubling down on difficult but necessary reforms. Diversifying government revenues. Improving the business climate. Increasing access to finance. Making labour markets more flexible and raising women’s participation.” While not directly addressing EOSG reforms, these reform strategies could influence future policies on employee benefits and retirement systems.

Recent Developments

Dubai International Financial Centre (DIFC) launched the DEWS (DIFC Employee Workplace Savings) plan in 2020, which replaced the end-of-service gratuity with a regulated, employer-funded DC scheme. The UAE is now expanding this approach across more sectors, as other companies introduce similar workplace saving schemes. In October 2023, the UAE Cabinet introduced a voluntary pension savings scheme to replace the traditional EOSG system for private sector and free zone employees. Employers opting into this system contribute monthly to a savings fund, which is invested into approved investment funds. The scheme is designed to help enhance the growth potential and security of these benefits from both inflation and the risk of employer insolvency, aligning more closely with global DC practices.

How the UAE Savings Scheme Works

Employer Participation: Employers can voluntarily opt into the Savings Scheme by submitting a request to the Ministry of Human Resources and Emiratisation (MoHRE). Upon approval, they select an investment fund licensed by the Securities and Commodities Authority (SCA) to manage the contributions.

Contributions: Employers make monthly contributions based on a percentage of the employee's basic salary:

• 5.83% for employees with less than five years of service.
• 8.33% for employees with more than five years of service.

 Investment Options: The scheme offers various investment portfolios, including Sharia-compliant funds and capital-guaranteed options, catering to different risk appetites and ensuring compliance with Islamic finance principles.

Thus far, a small number of financial institutions in the UAE have been approved to offer end-of-service products under this scheme, including conventional, capital-guaranteed, and Sharia-compliant investment options.

As both the Savings Scheme and these products are relatively new – and while they remain voluntary - there has not yet been wide adoption. However, the approval and availability of these funds indicate a growing interest among employers in the UAE to manage end-of-service benefits more effectively through structured investment schemes.

“It may be the case that when there are enough products in the market, the UAE government will then flip the switch and say, every employer in the UAE must fund their gratuity in one of these local products,” says Michael Brough, senior director at WTW, who focuses on developing and emerging markets.

“So, what we're seeing is that fund managers, insurance groups, and local banks are looking at what they can do to create a better product than has already been launched to date. In theory, every company in the UAE would then be setting aside their DC monies into a pot with these local products.”

Indeed, in early 2025, Sukoon Workplace Savings Solutions launched an alternative to DEWS with the ‘Go Saver’ employee money purchase plan, with the aim of providing end-of-service benefits and workplace savings to companies in DIFC. A notable feature of Go Saver is that employees will have the option to choose from a carefully designed menu of diversified investment offerings, including Sharia-compliant funds. The plan includes an option to fully protect capital via Sukoon Insurance and Generali Global Pension, 13 independent funds, and a range of portfolios aimed at specific risk levels.

Developments in Other Countries

Bahrain

In March 2024, Bahrain implemented a new end-of-service benefit system for foreign employees. Under this system, employers are required to submit monthly contributions to the Social Insurance Organisation (SIO) within the first 15 days of each month. The SIO then manages these funds and disburses the accumulated gratuities to employees upon the termination of their employment. This approach aims to safeguard employees' entitlements and mitigate risks associated with employer defaults.

Saudi Arabia

The main roadblock to evolving Defined Contribution offerings in Saudi Arabia has been a lack of infrastructure (eg., pension administrators and custodians). Until that foundation is further developed, Saudi Arabia continues to operate under the traditional end-of-service gratuity framework. Notably, however, some leading companies have proactively established corporate savings schemes to supplement the mandatory benefits, implementing arrangements that go beyond the statutory requirements and aiming to enhance employee retention and satisfaction.

Qatar

Qatar’s mandatory state-owned pension plan is only for certain Qatari nationals, who are entitled to an end of service gratuity (i.e., 3 weeks basic salary for each year of service). At the moment, other voluntary private DB or DC plans are much rarer. However, getting the DB/EOSB obligations funded into an alternative scheme is likely to become a bigger priority for the government of Qatar, which would then need to find administrators to oversee a new state system.

Oman

Oman has maintained a traditional end-of-service gratuity system, where employers provide a lump-sum payment to employees upon the conclusion of their service. However, the Ministry of Labour has indicated plans to transition to a savings system as outlined in the Social Protection Law. Until this new system is implemented, the existing gratuity provisions remain in effect.

Challenges

While much progress has been made on the region’s trend towards adopting a DC model, some challenges do remain – but there are strategies available to address them.

• Regulatory Complexity and Compliance: Implementing and standardizing DC frameworks across multiple jurisdictions within the GCC requires significant regulatory reform. Each country operates under different labour laws, creating complexity in ensuring compliance. However, GCC governments are updating labour laws to establish clear governance frameworks and align with international best practices. For example, the UAE’s DEWS system operates under the DIFC regulatory structure, ensuring transparency and legal oversight. Collaboration between public and private sectors is also helping to create consistent standards
• Employer Adoption and Cost Concerns: Transitioning to a DC model may increase administrative burdens and costs for employers. Companies accustomed to paying varying lump sums upon an employee’s departure may be hesitant to commit to ongoing regular contributions for active employees, but offering flexible contribution structures and tax incentives can encourage employer participation. For example, voluntary pension schemes in the UAE give employers the option to align contributions with corporate cash flow. Some regions are also considering phased implementation to allow businesses time to adjust.
• Investment Management and Governance: Ensuring that DC plans are age-appropriate and well-managed, and can deliver long-term returns while minimizing risks is a priority. Poor fund performance – or a lack of appropriate investment vehicles – could undermine employee trust in the system. That’s why GCC countries are adopting multi-manager investment models to enhance diversification and reduce risk. In the UAE’s DEWS plan, professional fund managers oversee contributions, offering a range of investment choices. Independent governance committees also ensure transparency and adherence to best practices.
• Educational and Behavioural Shifts: Many employees in the GCC (both local and expatriate) are used to the gratuity system and may be unfamiliar or uncomfortable with a market-based retirement plan that requires personal decision-making. One essential tool in addressing this is robust education, both for participants and employers. Beyond basic education programs, there’s a growing focus on personalized financial advice and digital tools. For example, interactive platforms and mobile apps can help participants monitor contributions, simulate retirement outcomes, and adjust their investment choices. In other countries, we’ve seen the successful use of behavioural nudges, such as automatic enrolment into DC schemes and default investment options, to remove the need for extensive engagement by the member.
• Providing Sharia-compliant investment options also helps align with cultural and religious expectations, increasing trust and engagement.

We’ll take a closer look at some of these challenges and solutions in upcoming Insights articles, as GCC countries continue to explore and adopt alternative models to manage retirement savings benefits, enhancing financial security for employees and aligning with international best practices.

Finally, the authors would like to thank Michael Brough, Senior Director of Integrated & Global Solutions at WTW, who specializes in developing and emerging markets, for his time and insights in developing this article.

About State Street Global Advisors

With more than 40 years’ experience in Defined Contribution and public policy, State Street Global Advisors has an integrated approach to addressing the challenges surrounding retirement readiness on a global basis. We serve relationships that span the retirement industry, including leading defined contribution plan sponsors, consultants, advisors and recordkeepers. Please reach out to our Client Service Middle East Africa team ClientServiceMiddleEastAfrica@ssga.com to talk about how we can help you with your Defined Contribution solutions.