GPSSA clarifies service purchase conditions for early retirement

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, while 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 he/she has reached the age of 60.

Approved purchase of service years

Insured males can purchase an additional five service years while females are able to purchase ten service years under the provisions of Federal Law No. 7 of 1999 on Pension and Social Security and its amendments. However, the service years that can be purchased differs for those covered under Federal Law No. 57 of 2023 on Pension and Social Security, which limits the purchase period to five years for both genders.

Longer service years results in higher pension percentage

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% in accordance with Federal Law No. 7 of 1999, an increase of 2.67% 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% for each year employed that exceeds 30 years.

Purchase ceiling for service years

Other than the period required for the purchase of service years, the length of service that can be purchased and the percentage of increase for each year, there are no other fundamental differences in the purchase rules between the two federal laws.

In this context, it is important to note that the period that qualifies an individual to receive the maximum pension amount should not exceed 35 years.

Cost of purchase of service years

Purchase costs are calculated based on the contribution account salary on the date of submitting the request, multiplied by 20%, 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 the insured’s contribution account salary is AED20,000 and he/she wishes to purchase five years, the calculation for this is AED20,000 x 20% x 60 (months) = AED240,000.

As for those covered by Federal Law No. 57 of 2023, the purchase costs are calculated on the basis of the contribution account salary on the date of submitting the purchase request, multiplied by 26%, multiplied by the period to be purchased in months.

For example, if the salary of an insured’s contribution account is AED20,000 and he/she wants to purchase five years, the calculation for this will be AED20,000 x 26% x 60 (months) = AED312,000.

While employed in an entity

To be eligible to purchase service years, the insured must be employed. If his/her 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 prior to completing payment, the installments will continue to be collected from his/her heirs.