GPSSA clarifies conditions for Emiratis purchasing service years for early retirement

   The General Pension and Social Security Authority (GPSSA) said that insured Emiratis who wish to receive a lucrative pension rate and retire early may revert to purchasing inactive service years in addition to their actual employment period, as per federal pension laws. 

GPSSA’s service “Purchase of Service Years” differs from one federal law to another. According to Federal Law No. 7 of 1999 regarding pension and social security and its amendments, the insured must have spent 20 years employed in an entity. 

In Federal Law No. 57 of 2023 (whose provisions apply to those joining employers for the first time after the 31st October 2023), the insured must have served not less than 25 actual service years when submitting the purchase request or 15 years if the insured has reached the age of 60. 

Under Federal Law No. 7 of 1999, males can purchase up to five additional service years, while females can purchase up to ten. Federal Law No. 57 of 2023 limits the purchase period to five years for both genders. 

The percentage granted by each purchased service year varies in accordance with the pension laws applied by the GPSSA. While purchased years grant an insured male or female an increase of 2 percent in accordance with Federal Law No. 7 of 1999, an increase of 2.67 percent is granted to employees whose contribution period is from 25 to 30 years.

As for the pension calculation scheme in Federal Law No. 57 of 2023, the insured receives 4 percent for each year employed that exceeds 30 years. 

Other than the period required for the purchase of service years, the maximum length of service that can be purchased, and the percentage increase per year, there are no fundamental differences in the purchase rules between the two laws. However, the total service period qualifying an individual for the maximum pension must not exceed 35 years. 

Purchase costs are calculated based on the contribution account salary on the date of submitting the request, multiplied by 20 percent, which is the percentage of contributions received by the employer and the insured for the purchased period, multiplied by the period to be purchased in months.

For example, under Federal Law No. 7 of 1999, if an insured person earns Dhs20,000 and wishes to purchase five years, the cost is Dhs20,000 x 20% x 60 months = Dhs240,000. 

Under Federal Law No. 57 of 2023, the cost is calculated by multiplying the contribution account salary by 26 percent and the period to be purchased in months. Using the same salary example, the cost for five years would be Dhs20,000 x 26% x 60 months = Dhs312,000. 

To be eligible to purchase service years, the insured must be employed. If the service period ends without paying the full purchase cost, the purchased years are calculated based on the amounts actually paid. If the insured is deceased before completing payment, the instalments will continue to be collected from their heirs.