New DIFC Employee Workplace Savings Scheme Proposed23 Oct 2019
On 17 October the Dubai International Finance Centre (DIFC) issued a consultation paper proposing amendments to its employment laws. The amendments will replace the current defined benefit end-of-service gratuity payment regime.
By the proposal, all employers based in the DIFC will pay mandatory contributions into a Qualifying Scheme by 1 January 2020. The Qualifying Scheme can either be the new DIFC scheme known as the DIFC Employee Workplace Savings ("DEWS") plan or separate plan which the employer has set up for its employees which also satisfies the relevant requirements. The alternative qualifying scheme is designed to cater for employers that have already been contributing to a plan on the behalf of their employees, or who have specific requirements that are not catered for by the DEWS plan.
The key proposals are as follows:
- Will be established as a master trust structure, governed by an independent trustee domiciled in the DIFC
- To be regulated by the Dubai Financial Services Authority ("DFSA")
- Benefits and contributions to be similar to the end of service gratuity structure, so that:
- the minimum employer contribution rates under DEWS match the previous minimum accrual rates; and
- there will be no change to benefits accrued under the existing end of service gratuity structure
- Costs to be recovered through an annual management charge to be applied to employees' investment accounts
The requirements for the Qualifying Scheme are set out in new employment regulations which will be introduced under Article 66 of the Employment Law DIFC Law No. 2 of 2019. The key aspects of the Qualifying Scheme are summarised as follows:
- The Qualifying Scheme is to be established as an "Employee Money Purchase Scheme" based on the definition in the UK Pension Schemes Act 1993
- Employer contributions to be made so that the minimum employer contribution rates match the previous minimum accrual rates for the end of service gratuity structure
- Benefits to be payable upon a member leaving their employment or service
- A definition of "Recognised Regulator" is included in the regulations (which includes the DFSA) so that each of the scheme's operator, administrator, investments adviser and fund manager of the scheme is regulated by such Recognised Regulator
- To be overseen by a "Supervisory Body" who shall protect the interests of the scheme's members and provide non-regulatory oversight
- Requirements for the scheme's investment adviser to be separately regulated to avoid conflicts of interest
It is also proposed that benefits accrued under the existing end of service gratuity structure up to the Qualifying Scheme Commencement Date will be preserved. Further, the salary link in respect of those benefits will be retained up to the employees’ termination date, but employers can make payments into the Qualifying Scheme to extinguish the liability with the employees’ consent.
The consultation will close by 18 November 2019. Bedell Cristin is reviewing the consultation paper to assess whether an International Savings Plan established under Jersey's legislation would satisfy the requirements of a Qualifying Scheme. If you have any comments or questions on the consultation paper or the Jersey legislation please do not hesitate to contact us.