The General Organisation for Social Insurance (GOSI) is the government body at the heart of the Saudi Arabian retirement system. It is responsible for implementing social insurance laws and regulations that provide mandatory retirement pensions and other benefits to eligible workers. A critical distinction within the system is the coverage offered to Saudi and Gulf Cooperation Council (GCC) nationals compared to expatriate workers. Recent reforms, implemented in July 2024, have introduced significant changes to the system, particularly for new entrants to the workforce.
The GOSI Pension System for Nationals
The GOSI pension system is a mandatory, government-backed scheme for all Saudi nationals in both the public and private sectors. It is funded by contributions from both the employee and their employer, which are calculated as a percentage of the employee's monthly wages, including basic salary and housing allowance. This system ensures long-term financial security for citizens during their retirement years.
Contribution Rates for Saudi Nationals
Recent reforms dictate a gradual increase in contribution rates for Saudi nationals who entered the workforce after July 3, 2024, and had no prior GOSI contributions. Existing contributors retain their current rates. For new contributors starting after July 3, 2024, rates will increase gradually over several years, reaching 10.25% each for employee and employer by July 2025, and 11% each by July 2028.
Retirement Eligibility and Pension Calculation
Eligibility for a GOSI pension depends on both age and contribution duration, with reforms altering requirements primarily for newer employees. For new labor market entrants (post-July 3, 2024), the normal retirement age is 65 Gregorian years, with early retirement possible at age 55 with 30 years of contributions. The pension calculation method can be found on {Link: Lockton global.lockton.com}. Conditions for existing contributors differ, with gradual increases to retirement age for certain individuals and changes to early retirement contribution requirements.
The System for Expatriates
The Saudi retirement system has historically excluded non-Saudi workers from the national GOSI pension scheme. Expats historically received an End of Service Gratuity (EoSG) and were responsible for their own retirement planning. However, recent reforms have introduced a voluntary pension and savings program for foreign workers, allowing expats to save and invest within Saudi Arabia and enhance their financial security.
Comparison of Saudi and U.S. Retirement Systems
The retirement systems in Saudi Arabia and the United States have different structures. Saudi Arabia primarily offers a mandatory defined-benefit pension for nationals (GOSI), now with voluntary options for expats, funded by mandated employer and employee contributions. The U.S. combines mandatory Social Security (defined benefit) with voluntary defined-contribution plans like 401(k), funded by payroll taxes and voluntary contributions. In the U.S., foreign workers generally pay into Social Security and may access employer plans. Both systems have undergone or are facing reforms to address sustainability concerns. Retirement ages and early retirement conditions also differ between the two countries. In global rankings, both received a C+ rating in 2024, indicating areas for improvement.
Conclusion
The retirement system in Saudi Arabia is undergoing significant changes, particularly with the July 2024 reforms. The mandatory GOSI system for Saudi nationals remains central, with adjustments to retirement age and contributions for new workers to ensure sustainability. Notably, the introduction of voluntary pension and savings schemes for expatriates marks a major shift, providing non-Saudi workers with new avenues for retirement planning beyond the traditional End of Service Gratuity. These developments reflect Saudi Arabia's efforts to adapt its social welfare and pension systems to meet evolving demographic and economic needs. For more detailed information, refer to the official GOSI website.
