State Pension Plan

Current law requires that only employees holding Kuwaiti citizenship pay into a State Pension Plan. The Public Institution for Social Security (in Arabic) is the State of Kuwait's public pension scheme. There are three unique characteristics in the structure of Kuwait's social pension system.

First, it receives financing from three different entities, specifically, the contributors and the employers - who jointly pay 60% - Kuwait's government pays the remaining 40%. Kuwaiti's pension scheme has the highest benefits for its people in the entire Gulf region, the Arab world, and most of the Western world.

Second, Kuwait's PIFSS is a fully funded foundation meaning, the proceeds it receives from today's contributors will not directly influence the funds available to pay policy holders, hence ensuring the sustainability of the pension scheme for many years to come. This concept is vastly different from state pension funds found in other countries, where the money currently invested is being used to fund the present policy holders, creating a huge uncertainty for future generations down the road.

Lastly, the pension fund pays out handsomely. After the age of 30, monthly payouts rise to 95% of the employee's salary. In today's world, nearly all pension schemes pay a maximum of 65% after 30 years. The minimum amount Kuwait's pension scheme will pay is 65% of one's salary. Most people can retire at the age of 50.

Expat Pension Plans

A few countries have a bilateral agreement with Kuwait that allow for years worked in Kuwait to count to their State pension. Inquire with your state plan about the particulars.

If your country does not allow for years worked in Kuwait to count toward your state pension, there may be an opportunity to buy back  time once you have returned to your home country and are once again contributing to the pension plan. Again, inquire with your state plan about the particulars.

Company Pension Plan

Some commercial companies operating in Kuwait may or may not offer their employees company benefits. Generally speaking, people come to Kuwait for the possibility of making significantly more money than they would in their own country. Hefty salaries are a big motivator for many, enticing many to want to come and work in Kuwait. For individuals in upper management positions, stock options may be offered on top of an already generous and often times inflated salary.

Private Pension Plan

Currently, no pension plans exist in Kuwait for foreign workers. Most expats set up a retirement/pension plan back in their home country and contribute that way. If you were paying into a state pension in your home country, it is advised that you should continue to do so. However, you should also take advantage of the high disposable income that you will receive in Kuwait and set up a personal pension plan.

Each country has its own set of pension plan schemes and they vary greatly from one another. In the US, for example, there are two major types of retirement, defined benefit and defined contribution. A defined benefit plan, is funded by your employer/company or business, promising you a definite monthly amount once you've reached retirement age. The plan may promise you an exact monthly amount, such as $100 per month. Or, more often than not, calculates your benefit using a specialized formula that takes into account such things as your salary, your age, and even the number of years you were employed for that particular company. A good example would be, your pension payment might be equivalent to 1 % of your overall average wages or salary paid for the last 5 years of employment which, is then multiplied by your total years of service to the company or business.

The other popular retirement plan is known as a defined contribution plan. Unlike the defined benefit plan, this retirement plan doesn't promise you a specific amount at retirement. As an alternative you and/or your employer make monthly contributes into your individual retirement account. As a result, you become solely responsible for determining how these contributions are invested, and deciding how much to contribute from your paycheck through pretax deductions. Additionally, your company or business may add to your retirement account, by matching a certain percentage of your contributions. The value of your individual retirement account depends greatly on how much you're willing to invest over the years you're employed.  At retirement age, you receive the balance in your account which reflects the contributions, all your investment gains or losses, and any fees charged against your account.

The 401(k) plan is a popular type of defined contribution plan. There are four types of 401(k) plans: traditional 401(k), safe harbor 401(k), SIMPLE 401(k), and automatic enrollment 401(k) plans. The SIMPLE IRA plan, SEP, employee stock ownership plan (ESOP, and profit sharing plan are other examples of defined contribution plans.

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