UAE’s ‘Second Salary’ savings plan offers its expat majority passive income

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The United Arab Emirates (UAE) announced on Tuesday the launch of a customized savings solution called Second Salary, which appeals to the country’s majority expatriate population who are not offered a government-backed savings plan like those available to nationals.

The project is developed by National Bonds, an Islamic finance compliant savings and investment company owned by the main investment arm of the Dubai government, Investment Corporation of Dubai.

Second Salary will be available to nationals and the estimated 90% expatriate population of the UAE, to generate supplementary income. This is the first step in establishing a long-term retirement plan structure, according to a National Bond press release.

Mohammed Qasim Al Ali, CEO of National Bonds Group, said that the investment plan was created in response to a growing demand to create a sustainable second income, which gained more popularity after the COVID-19 pandemic.

Second Salary “offers an affordable and seamless enabler for UAE residents to achieve financial security,” Ali said.

The plan has two main stages. The first stage is a savings stage where customers can put selected amounts of money into National Bonds monthly for a period of three to 10 years. After this period is the income phase, which allows the customer to withdraw monthly income that consists of their investment base plus accumulated interest or profit.

The personal savings investment plan can give a double return on investment, according to National Bonds. If a customer invests the same amount of $1,361.47 (5,000 AED) per month for five years but chooses to redeem their investment over a period of three years instead of the equivalent five years, they can use their initial investment in monthly withdrawals take home more than double, or $2,777.40 (10,200 AED) monthly.

Personal savings and pension plans have emerged in the UAE in recent years in response to resident demand, with Commercial Bank of Dubai’s Smart Pension Plan and others. National Bonds released its Golden Pension scheme last year which included similar savings plans, but Second Salary is meant to be more flexible, allowing customers to withdraw their money more easily, quickly and without penalties, said Ali in an interview with Gulf News.

The Middle East and North Africa (MENA) region is considered to be the worst savers across the world economies, according to the World Bank’s 2016 Savings for Old Age report, which reported at the time that only 7% of adults in the region saving for retirement.

Recently, fintech applications are encouraging and making it easier for young MENA people to change this situation and invest for the future even when financial saving resources are not available to them as well.

Most oil-rich Arab Gulf states, including the UAE and top crude exporter Saudi Arabia, have provided their citizens with government-sponsored pensions.

But Saudi officials warned last year that the system is unsustainable, according to Bloomberg, as the kingdom continues to transition its economy away from oil by investing in and developing non-oil sectors.

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