EK Provident Fund Facts
The Current UAE Labour Law with respect to Gratuity:
"Administered by the Federal Ministry of Labour and Social Affairs, Labour Law in the UAE is loosely based on the International Labour Organisation's model. UAE Law No. 8 of 1980, as amended by Law No. 12 of 1986 (the "Labour Law") governs most aspects of employer/employee relations, such as hours of work, leave, termination rights, medical benefits and repatriation. The Labour Law is protective of employees in general and overrides conflicting contractual provisions agreed under another jurisdiction, unless they are beneficial to the employee.
The Ministry issues a model form of labour contract in Arabic which is widely used, but other forms of contract are enforceable, provided they comply with the Labour Law. End of contract gratuities are set at 21 days pay for every year of the first five years of service and 30 days for every year thereafter. Total gratuity should not exceed two years' wages. Employees are entitled to pro-rated amounts for service periods less than a full year, provided they have completed one year in continuous service".
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Translation (as I understand the law):
Emirates must pay you a gratuity of 21 days/year BASIC salary for the first 5 years and 30 days/year BASIC salary thereafter. Note that the law "implies" this would be paid out upon termination of employment (as would be the case if you were a labourer) but in the case of Emirates they pay it out monthly via the A account of the Provident Fund.
Note if you do the math 21/365 = 5.753% of basic pay/year for the first 5 years and 30/365 = 8.219%of basic pay/year for beyond 5 years. Currently Emirates pays 12% of basic for the first 9 years and 15% thereafter. As you can see, Emirates has fulfilled their "legal" obligation by giving even more than that required by UAE labour law. Also they do not cap the payments at 2 years basic pay as outlined in the Labour Law. What you do with the money they give you is up to you. Emirates has no responsibility to protect your investment or to provide you with any rate of return. If your provident fund reads zero at the end then that is what you get as they have fulfilled their legal requirements by providing you with an ongoing gratuity over the life of your employment with them.
As to investments within the Provident Fund, you must remember 2 things. Firstly remember that both Fidelity and Merrill Lynch are "benchmark performance" funds. What this means is that they set their "performance bar" against a benchmark (in both cases for the EK equity funds they use the Morgan Stanley Capital International Index for Global Equities (commonly referred to as the MSCI) as their benchmark. They attempt to outperform the benchmark and if so they consider it a success. Now if the benchmark (MSCI) were to go down by 40% in a given year but their funds (and your account) "only" lost 39% in that year then they would consider this a success as they have "beat the benchmark" by 1%. Never mind that you lost 39% in that given year; not their problem as they "did their job" by beating the benchmark. That is their mandate.
The second point to remember is these Funds make their money based upon "assets under management". They make much more money "managing" money in an equities account than they do in a cash account. As such, while they will allow some room in their prospectus to switch from a long position into cash (mostly as a last resort if they are underperforming the benchmark), in most cases they will not do so. Reason being is as long as they are able to beat the benchmark (even though you might have lost money because the benchmark has fallen), they make more money as ongoing management fees for each dollar they have in their equities accounts than they do in their cash acounts. Hence they actually hurt themselves financially if they move your money into cash (even if the markets are plunging). Hope that makes sense.
Bottom line is in order to do well you must be willing to move money into/out of the equity funds (A & B account) into cash (as there is no opportunity to short the market in the Provident Fund) and also to pick the right "cash" to be in now that there is the option of either the USD, Euro, B.Pound, or Aussie dollar. A buy and hold strategy over the next 10 years will have very grave consequences in my opinion.
In all respects the C portion of your account should not (in my opinion) be invested with the Provident Fund. You need "absolute" returns in the C account to have any hope of coming out ahead in this game. I have done this for several years with much more success than those who have stayed in the Provident fund C account.
Food for thought.