UK Pension Schemes vs UAE Gratuity and DEWS

If you are a British expat living and working in the UAE, one of the most important financial decisions you will consider is how to build long-term retirement savings. Many individuals find themselves comparing continued UK pension contributions with the UAE’s end-of-service gratuity system or, for those working in the DIFC, the DIFC Employee Workplace Savings (DEWS) scheme.

Each option operates differently and carries its own set of features and considerations. This guide outlines the key distinctions between UK pension structures and the UAE’s retirement provisions and highlights how they may form part of an overall financial plan.

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1. Understanding the Basics

UK Pension Schemes

Defined Benefit (DB):
Provides a future income based on salary and years of service. The employer carries the investment and funding responsibility.

Defined Contribution (DC):
Your retirement pot is built through contributions and investment growth. The value depends on market performance and contribution levels.

International SIPPs / QROPS:
These can be used by expats to consolidate UK pension benefits into a structure that offers wider investment choice and administrative flexibility.

UAE Gratuity System

End-of-Service Gratuity:
A lump sum paid when an employee leaves their role, calculated using final basic salary and completed years of service.

This system is not pre-funded. Employers typically pay the amount from their cash flow at the time of departure.

DEWS Scheme (DIFC)

A fully funded workplace savings plan that replaces the gratuity system for DIFC-based employees.

Employers contribute a mandatory percentage of salary into a regulated savings fund. Contribution levels generally range from 5.83 percent to 8.33 percent depending on years of service.

Employees may also make voluntary contributions, and investment choices are available within the scheme.

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2. Tax Efficiency

UK Pensions

• Tax relief may apply to contributions if you are UK tax-resident.
• Withdrawals are usually subject to income tax in the UK after retirement.
• Certain pension structures may offer estate planning benefits under UK regulations.

UAE Gratuity and DEWS

• The UAE currently levies no personal income tax, so contributions/withdrawals under UAE frameworks are typically not taxed in the UAE. However, UK tax (or tax in your country of residence) may apply to UK pensions or when you repatriate funds — taxation depends on your UK tax residency status, the source of the pension income, and any relevant double tax treaty. There is no tax relief on contributions.
• DEWS funds are held in a trust structure, offering oversight and alignment with international governance standards.

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3. Funding and Security

UK Pension Schemes

• Regulated by The Pensions Regulator, with clear funding and governance requirements.
• DB schemes provide a level of security but may face funding pressures.
• DC schemes depend on individual contributions and investment performance.

UAE Gratuity

• An unfunded employer liability.
• Payment depends on the financial position of the employer at the time the employee leaves.
• There may be risk of delayed or reduced payment if the employer faces financial challenges. Because gratuity is an unfunded liability, payment depends on the employer’s solvency at exit; where employers delay or are insolvent, payment may be at risk

DEWS Scheme

• Funded from the start through regular employer contributions.
• Assets are held in a separate, regulated trust.
• Investment managers oversee the funds, providing transparency and reporting.
• DEWS is a funded trust arrangement and provides greater structural security than unfunded gratuity; however investment risk and counterparty risk remain.

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4. Flexibility and Portability

UK Pensions

• Generally accessible from age fifty five (increasing to fifty seven).
• Options exist to consolidate pensions using international structures such as SIPPs or QROPS.
• Multi-currency and flexible drawdown options may be available depending on the provider.

Gratuity

• Paid as a lump sum when employment ends.
• Not portable or transferable.
• Ends when the employment relationship ends.

DEWS

• The account can move with an employee from one DIFC employer to another.
• Voluntary contributions and self-management can continue if the employee remains in the UAE outside the DIFC, depending on scheme rules.
• More flexible than gratuity but still specific to DIFC employers unless continued voluntarily.

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5. Retirement Planning Potential

UK Pensions

• Designed specifically to support retirement income.
• Wide investment choice, long-term planning tools, and options such as annuity or drawdown are available.

UAE Gratuity

• Not designed as a retirement savings vehicle.
• Amounts are often modest relative to long-term retirement needs.
• Best viewed as an employment benefit rather than a retirement plan.

DEWS

• Provides a regulated framework for workplace savings.More suitable for long-term saving than gratuity alone.
• Many individuals choose to combine these options as part of a broader financial strategy, subject to independent advice.

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Conclusion
For British expats, UK pension schemes can continue to play a central role in long-term planning. At the same time, the UAE’s gratuity system and DEWS scheme can add supplementary benefits, although they operate very differently.

The DEWS scheme marks a significant improvement in structure and transparency compared to traditional gratuity, but it is specific to the DIFC. Given the varied nature of these systems, many expats find it helpful to evaluate how each element fits into their overall financial picture, taking into account cross-border regulations and personal objectives.