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

The United Arab Emirates (UAE) announced the launch of a customized savings solution on Tuesday 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 initiative is developed by National Bonds, an Islamic-finance compliant savings and investment company owned by the principal investment arm of Dubai’s government, Investment Corporation of Dubai. 

Second Salary will be available for both nationals and the UAE’s estimated 90% expatriate population, to generate supplementary income. It’s the first step in establishing a long-term retirement plan structure, according to a National Bonds press release. 

Mohammed Qasim Al Ali, Group CEO of National Bonds, said 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 "provides UAE residents with an affordable seamless enabler to achieving financial security,” said Ali. 

The plan is made up of two main phases. First is a saving phase in which customers can place 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 income monthly that consists of their base investment plus accumulated interest or profit. 

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

Personal savings and pension plans have emerged in the UAE over recent years in response to the demand from residents, with Commercial Bank of Dubai’s Smart Pension Plan and others. National Bonds issued its Golden Pension scheme last year that 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 are considered the worst savers across global economies, according to the World Bank’s 2016 Saving for Old Age report, which at the time reported that only 7% of adults in the region save for retirement. 

More recently, fintech applications are encouraging and making it easier for MENA youth to change this narrative and invest for the future even when financial saving resources aren’t as available to them. 

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

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