Pension Reform Joins the Gulf’s Talent Retention Toolkit

The Gulf states want their highly skilled expatriates to stay, but the recent war with Iran has been a reminder of how easily they can leave. The war has tested perceptions of stability for expatriates in the Gulf. In the weeks that followed the February 28 U.S.-Israeli bombing of Iran, the United Kingdom foreign secretary reported that more than 100,000 British nationals departed the Gulf, including expatriates and tourists. To incentivize their return, the United Arab Emirates has indicated privately that it might allow expatriates to spend more time abroad without losing their residency status in the UAE.

Setting aside the volatility and psychological weight of the ongoing conflict with Iran, day-to-day life for expatriates in the region has long been considered distinctively safe, with low crime and a strong record of political and social stability that predates the current conflict. Pension reform aims to extend that durable lifestyle with a more credible long-term financial commitment.

In October 2025, the Dubai International Financial Centre announced that its workplace savings plan for expatriates crossed $1 billion in assets in five years. The milestone, achieved by the Dubai International Financial Centre Employee Workplace Savings Plan, signals a subtle shift in how governments in the Gulf states compete for international talent. Because citizenship is largely off the table for expatriates, momentum is growing in Gulf Cooperation Council states to develop defined-contribution retirement systems for highly skilled professionals and transition away from traditional end-of-service gratuity payouts.

This shift reflects a sharper tension between the competing goals of nationalization and diversification. As governments in the Gulf work to move more of their citizens into private-sector employment, they still need expatriate professionals, especially in sectors where international expertise cannot be replaced quickly. Transient labor contracts have long been part of Gulf labor markets, but economic diversification requires more than attracting workers for a few years. Knowledge-intensive sectors need continuity, client relationships, and professionals who stay long enough to support knowledge transfer to citizens entering the private sector.

Because naturalization for expatriates remains rare, policymakers have built other ways to attract talent: golden visas, premium residency programs, and tax-free income. But pension reform addresses the harder question of why they should stay. It gives expatriates a much stronger financial stake in the region and a basis for planning their future upon repatriation.

Retirement Security for Talent Retention

The end-of-service gratuity system, the traditional expatriate retirement model in the GCC states, was designed for temporary stays. The UAE’s system, similar to those in other GCC states, pays its highly skilled expatriate professionals 21 days of basic salary for each of the first five years of service and 30 days for each year after that, capped at two years’ wages. For short stays, that payout can be useful. However, for professionals spending 10 or 20 years in the Gulf, it is a thin substitute for retirement savings.

The Gulf’s highly skilled workforce includes many nationalities, with different family obligations, savings goals, and options for mobility and repatriation. For temporary professionals who dedicate much of their working lives to the Gulf, a retirement benefit tied only to final departure – a gratuity – undersells the scale of their contribution.

Employers calculate the gratuity on base salary alone, excluding housing or transportation allowances that can make up a significant part of an expatriate’s pay package. The gratuity does not grow through investment, is vulnerable to inflation, and depends on the employer’s ability to pay. A survey of 1,504 expatriates in Qatar, Saudi Arabia, and the UAE suggests that employees largely feel that the current end-of-service gratuity system doesn’t meet  their retirement savings needs or only does in part.

From Gratuity to Defined Contributions and Investment Funds

The Dubai International Financial Centre has gone furthest in replacing the end-of-service gratuity model. Since 2020, employers in the special economic zone have been required to place eligible workers in a funded, professionally managed defined-contribution arrangement. For example, under the DIFC Employee Workplace Savings Plan, employers make monthly contributions into professionally managed investment funds rather than paying employees a flat lump sum when they leave. Employees accumulate a funded account over time and can choose from a range of investment options. When employment ends, members can transfer all or part of their balance to a UAE or international bank account or leave it invested and continue managing it after moving abroad. In simple terms, the employee workplace savings plan turns end-of-service benefits from a lump sum paid during an employee’s exit into a savings pot built during employment, making the DIFC framework the Gulf’s clearest mandatory, defined-contribution alternative to the end-of-service gratuity for expatriates today.

As a free zone with its own employment framework, an independent regulator, and a workforce drawn heavily from international finance and professional services, DIFC was a logical place to begin. Its employee workplace savings plan showed that defined-contribution reform can work, but it is unclear whether the model is implementable beyond a highly regulated free zone in more varied mainland labor markets. State Street Investment Management (formerly State Street Global Advisors) has laid out what it sees as best practice for scaling defined-contribution reform across the region: centralized administration so individual employers aren’t left building their own plans from scratch, tax-advantaged contributions from both employers and employees, automatic enrollment so participation doesn’t depend on workers opting in themselves, simple default investment options for those who don’t make an active choice, and a clear path for turning savings into steady income once workers actually retire.

The UAE has begun moving in that direction, though not as far as the DIFC model. Through a 2023 resolution, the Cabinet created a voluntary alternative end-of-service benefit scheme for mainland and free-zone private employers. A public consultation by the Ministry of Human Resources and Emiratisation described the program as a sustainable alternative that allows investment returns, fosters saving, protects employee rights, and supports competitiveness. However, the ministry’s official guidance still treats the system as voluntary in mainland UAE.

Elsewhere in the Gulf, reform is proceeding at different speeds and through different models. Oman has become the first Gulf state to write a mandatory savings program for expatriate workers into law, replacing the gratuity system starting in July 2027, though its design differs from the DIFC plan, as savings will sit in a single fund managed by the state rather than in accounts that workers invest themselves. Saudi Arabia is preparing to launch a voluntary pension and savings program open to both Saudi and foreign workers, but it has not yet become operational. Qatar has begun developing an investment-based savings system for expatriate employees, but the framework remains under development. Bahrain has required employers to prefund end-of-service benefits for eligible non-Bahraini private-sector employees through monthly contributions to the Social Insurance Organization since March 2024, although the system remains closer to a prefunded gratuity than a worker-directed defined-contribution account. Kuwait, meanwhile, continues to rely primarily on the traditional statutory end-of-service indemnity.

Why Governments Are Moving Away From the Gratuity Model

A WTW survey found that 61% of Gulf organizations with enhanced end-of-service benefits began offering them primarily to attract and retain key talent. However, talent retention alone does not explain the pace of reform. Funded workplace savings may also contribute to domestic capital formation. The GCC Statistical Center reported that the region sent $131.5 billion in worker remittances abroad in 2023, the highest globally.

Replacing a gratuity system with regular contributions to regulated funds creates a pool of professionally managed savings that can support the region’s asset-management and financial-services industries. In the UAE, the Securities and Commodities Authority has stated that the federal savings scheme is intended to grow workers’ savings and support the country’s economic ecosystem.

For employers participating in the UAE’s federal voluntary alternative end-of-service scheme, this domestic investment objective is reflected in the rules. Participating fund managers must invest a determined percentage in local investment products, while the Securities and Commodities Authority may set requirements for investing part of employer and voluntary contributions in the UAE economy and markets, provided that workers’ interests are protected. Some assets may be invested internationally, and workers may withdraw their balances or leave them invested after employment ends. The scheme can therefore support domestic capital formation and the UAE’s financial sector without preventing expatriates from repatriating their money.

The Retention Test

Gulf states are not only competing internationally but also with each other for skilled workers, especially as investments in artificial intelligence increase demand for global talent. Attracting professionals is one part of the challenge; governments must also give them stronger financial incentives to stay. The UAE must decide whether to expand or eventually mandate its voluntary mainland program; Saudi Arabia must convert its announced program into an operational system; Qatar must give institutional form to a framework still under development; Oman must deliver on its July 2027 launch; and Bahrain must determine whether prefunding a traditional gratuity is an endpoint or a first step. Kuwait, meanwhile, has yet to signal a comparable shift in retirement policy for its expatriate workforce.

In a region where citizenship remains off the table for most expatriates, greater retirement security is emerging as a significant talent retention tool. It signals to expatriates that the wealth they accumulate during their years in the region is protected, invested, and portable enough to carry them through their inevitable repatriation.

The views represented herein are the author's or speaker's own and do not necessarily reflect the views of AGSI, its staff, or its board of directors.