GPSSA Outlines Conditions For Emiratis To Purchase Service Years For Early Retirement

Emiratis aiming for an attractive pension rate and early retirement can consider buying inactive service years, as stated by the General Pension and Social Security Authority (GPSSA). This option complements their actual employment period under federal pension laws. The "Purchase of Service Years" service varies across different federal laws.

Federal Law No. 7 of 1999 mandates that insured individuals must have worked for 20 years in an organisation. Meanwhile, Federal Law No. 57 of 2023 applies to those joining employers after 31st October 2023. It requires a minimum of 25 years of actual service or 15 years if the insured is aged 60 when requesting the purchase.

The maximum service years purchasable differ by gender under Federal Law No. 7 of 1999, with males allowed up to five years and females up to ten. However, Federal Law No. 57 of 2023 standardises this limit to five years for both genders.

The percentage increase per purchased year depends on the applicable pension law. Under Federal Law No. 7 of 1999, each purchased year adds a 2 percent increase, while employees contributing between 25 to 30 years receive a boost of 2.67 percent per year. For those exceeding 30 years under Federal Law No. 57 of 2023, each additional year contributes a 4 percent increase.

Despite differences in purchase periods and percentage increases, both laws share similar rules for purchasing service years. The total qualifying service period for maximum pension benefits cannot exceed 35 years.

Cost Calculation Method

The cost for purchasing service years is determined by multiplying the contribution account salary at the request date by a specific percentage and then by the months to be purchased. Under Federal Law No. 7 of 1999, this involves a calculation using a rate of 20 percent.

For instance, if an insured individual earns AED20,000 and wishes to buy five years, the cost would be AED240,000 (AED20,000 x 20% x 60 months). In contrast, Federal Law No. 57 of 2023 uses a rate of 26 percent for calculations.

Eligibility Criteria

To qualify for purchasing service years, individuals must be employed at the time of application. If they do not complete payment before their employment ends, only paid amounts will count towards purchased years.

If an insured person passes away before completing payments, their heirs are responsible for continuing instalments based on amounts already paid.

With inputs from WAM