EK Provident Fund
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EK Provident Fund
I have been in EK sometime. The one thing I see is the discontent with the Provident Fund. We dont have much ability to imput or change many areas in EK. But where do we sstand with this, in my opinion, extremely poorly managed fund.
Who is accountable ?
Who is accountable ?
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Who is accountable?
Surely not the airline. They delegated responsibility when they hired the money managers to look after it.
Surely not the money managers. They have met the "benchmarks" dictated by their agreement with the company.
Who does that leave?
Surely not the airline. They delegated responsibility when they hired the money managers to look after it.
Surely not the money managers. They have met the "benchmarks" dictated by their agreement with the company.
Who does that leave?
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Guys, there is too much discontent at the moment with this and many other areas. We need a meeting, not with the ineffectual paper pushers, but the people that can change things. We need to push for a meeting, so let's all agree on a date and venue, and tell the managers where we will be and on what date. This has gone on for far too long now! My opinion is that the guys at the very top do not really know how unhappy we all are. Change has happened before by a show of unity in our unhappiness, so what do you all say?
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provident scheme
The best way to put forward your reservations about the performance of the Provident fund scheme is to
1) individually send in emails to the human resources manager looking after the PF scheme
2) Give examples of other similar schemes that provide a better return
3) Provide for alternative solutions and suggestions
4) Don't cr or seem to act like amob. The idea is to find a solution to a problem , not create one.
This way the Company can be armed with data and present your suggestions and perhaps revisit the initial targets set for the fundmanagers and their teams.
In summary every senior manager is part of the PF scheme and I'm sure will be equally happy to see a positive solution to the underperformance of the scheme.
As in most PF schemes employees are free to direct their contributions to made as the company is investing or can choose to use their own investng prowess by dabbling in other funds inb the Provident fund , that may be more adventures and offer a better return ,,,, perhaps!
BM
1) individually send in emails to the human resources manager looking after the PF scheme
2) Give examples of other similar schemes that provide a better return
3) Provide for alternative solutions and suggestions
4) Don't cr or seem to act like amob. The idea is to find a solution to a problem , not create one.
This way the Company can be armed with data and present your suggestions and perhaps revisit the initial targets set for the fundmanagers and their teams.
In summary every senior manager is part of the PF scheme and I'm sure will be equally happy to see a positive solution to the underperformance of the scheme.
As in most PF schemes employees are free to direct their contributions to made as the company is investing or can choose to use their own investng prowess by dabbling in other funds inb the Provident fund , that may be more adventures and offer a better return ,,,, perhaps!
BM
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Hi folks, as i understand you are talking about the provident fund managed by Fidelity or Templeton. We at QR have had hot discussions about it as well, though we don't have it yet. The investment guidelines for provident fund are stipulated by the law, which in your case is the British one, valid on Island of Man. That means certain restrictions in investments in other words, no risky business ergo poor performance. We are talking about 5 %. Neither the less, its supposed to accumulate over long terms in give it positive effect after not less than 10 years. However according to the law in golf states UAE and Qatar, after resignation employee has got the choice either to take gratuity payment (1 month per year) or the provident fund money, which ever is greater, unless one paid in to the fund less than 7 years, I think with EK. All in all the choice of investment instruments will be very limited, varying from government bonds till real estate projects, serving the main purpose safeguard you money and not spectacular growth. There's not much the managers in EK can do about it, I'm afraid.
Cheers.
Cheers.
Last edited by popay; 8th Nov 2005 at 15:32.
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popay, you are right about that. There is one thing that can and has to be changed though: we must be able to change our portfolio online with a click of the mouse.
Imagine that on a wednesday the stocks start to go down bigtime. You might get a bit concerned about your pension when things are heading south, and try to save some of the eggs in your basket, so you get your transfer form out, put all your equities in a safe haven, e.g. cash, fax the form to our friend S. at HR, and.... nothing happens until monday. Actually, saturday, S. comes back to work after his well deserved weekend, finds the fax you sent him 2 days ago and forwards the swap of funds to ML or Fidelity... where people are enjoying their weekend now until monday.
This could all be solved by just designing a decent website where we can manage our funds ourselves. It would still not be ideal, but at least you have control over your money, something that is completely lacking today.
MR8
Imagine that on a wednesday the stocks start to go down bigtime. You might get a bit concerned about your pension when things are heading south, and try to save some of the eggs in your basket, so you get your transfer form out, put all your equities in a safe haven, e.g. cash, fax the form to our friend S. at HR, and.... nothing happens until monday. Actually, saturday, S. comes back to work after his well deserved weekend, finds the fax you sent him 2 days ago and forwards the swap of funds to ML or Fidelity... where people are enjoying their weekend now until monday.
This could all be solved by just designing a decent website where we can manage our funds ourselves. It would still not be ideal, but at least you have control over your money, something that is completely lacking today.
MR8
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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".
............................................................ ............................................
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.
"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".
............................................................ ............................................
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.
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HI there, that's Qatari law regarding the gratuity payments, quite similar to UAE, I'd say.
Article (54)
In addition to any sums to which the worker is entitled to upon the expiry of his service, the employer shall pay the end of service gratuity to the worker who has completed employment of one year or more. This gratuity shall be agreed upon by the two parties, provided that it is not less than a three-week wage for every year of employment. The worker shall be entitled to gratuity for the fractions of the year in proportion to the duration of employment.
The worker’s service shall be considered continuous if it is terminated in cases other than those stipulated in article 61 of this Law and is returned to service within two months of its termination.
The last basic wage shall be the base for the calculation of the gratuity.
The employer is entitled to deduct from the service gratuity the amount due to him by the worker.
However according to the article 56 one has got the choice either to take provident fund or the gratuity, whichever is higher.
Article (56)
The employer who maintains a retirement system or a similar system which secures for the worker a greater benefit than the end of service gratuity to which the worker is entitled under the provisions of Article (54) of this law shall not be obligated to pay to the worker the end of service gratuity in addition to the benefit available to the worker under the said system.
If the net benefit accruing to the worker under the said system is less than the end of service gratuity the employer shall pay to the worker the end of service gratuity and return to him any sum whereby the worker may have contributed to the said system.
The worker may choose to receive either the end of service gratuity or the pension accruing to him under the said system.
Guess the UAE labour law would be the same.
Dune, you are absolutely right about the bloody bench mark chasing from fund managers. That's all they care about in a not active managed portfolio. Ergo the fund performance just reflects the basic movements of the market, which isn't supposed to be the idea of managing the money. More even they usually charge up to 2 % management fee+performance fee up to 20 % (subject of the contract)+initial fee, like bid ask spread. All in all you pay initially up to 5% and by the and of the year another 2% and possibly performance fee, for just buying some shares with rating better than A+ (Standard & Poor). I think, you would agree, one can do it himself, all you need is just a broker.
MR8, i agree with you about the advantage of operative access to the financial instruments in order to be able to reshuffle your assets. However I don't think it would help you in case of mutual funds, as you will just end up where you were, unless you keep it in cash. Another solution, much cheaper one , would be THE ETF_ exchangeable traded funds. The are classified as Shares and traded on NYSE or other mayor Exchanges. http://www.ishares.com/splash.jhtml;...questid=924747 Its much cheaper as you only pay the difference of bid ask price and can trade them just online whenever you want. I can warmly recomend www.saxobank.com as a broker. Besides that you can go for Type 0 funds, which are actively managed.
The question is how to combine it with the compulsory provident fund payment and how to convince the office of the better solution.
Hope that could help somehow,
Cheers.
Article (54)
In addition to any sums to which the worker is entitled to upon the expiry of his service, the employer shall pay the end of service gratuity to the worker who has completed employment of one year or more. This gratuity shall be agreed upon by the two parties, provided that it is not less than a three-week wage for every year of employment. The worker shall be entitled to gratuity for the fractions of the year in proportion to the duration of employment.
The worker’s service shall be considered continuous if it is terminated in cases other than those stipulated in article 61 of this Law and is returned to service within two months of its termination.
The last basic wage shall be the base for the calculation of the gratuity.
The employer is entitled to deduct from the service gratuity the amount due to him by the worker.
However according to the article 56 one has got the choice either to take provident fund or the gratuity, whichever is higher.
Article (56)
The employer who maintains a retirement system or a similar system which secures for the worker a greater benefit than the end of service gratuity to which the worker is entitled under the provisions of Article (54) of this law shall not be obligated to pay to the worker the end of service gratuity in addition to the benefit available to the worker under the said system.
If the net benefit accruing to the worker under the said system is less than the end of service gratuity the employer shall pay to the worker the end of service gratuity and return to him any sum whereby the worker may have contributed to the said system.
The worker may choose to receive either the end of service gratuity or the pension accruing to him under the said system.
Guess the UAE labour law would be the same.
Dune, you are absolutely right about the bloody bench mark chasing from fund managers. That's all they care about in a not active managed portfolio. Ergo the fund performance just reflects the basic movements of the market, which isn't supposed to be the idea of managing the money. More even they usually charge up to 2 % management fee+performance fee up to 20 % (subject of the contract)+initial fee, like bid ask spread. All in all you pay initially up to 5% and by the and of the year another 2% and possibly performance fee, for just buying some shares with rating better than A+ (Standard & Poor). I think, you would agree, one can do it himself, all you need is just a broker.
MR8, i agree with you about the advantage of operative access to the financial instruments in order to be able to reshuffle your assets. However I don't think it would help you in case of mutual funds, as you will just end up where you were, unless you keep it in cash. Another solution, much cheaper one , would be THE ETF_ exchangeable traded funds. The are classified as Shares and traded on NYSE or other mayor Exchanges. http://www.ishares.com/splash.jhtml;...questid=924747 Its much cheaper as you only pay the difference of bid ask price and can trade them just online whenever you want. I can warmly recomend www.saxobank.com as a broker. Besides that you can go for Type 0 funds, which are actively managed.
The question is how to combine it with the compulsory provident fund payment and how to convince the office of the better solution.
Hope that could help somehow,
Cheers.
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EK Providence Scheme
Hi guys, we all know the Providence Scheme ain't all it's cracked up to be so for the last two years I have been making my own provision pumping in US xxxx per month to an offshore plan...so far it's made me 63%, somewhat better then we get and in addition, I get access to any fund or fund manager of my choice. Also, for those that don't know this, (as I didn't!) all assets over here in Dubai come under Sharia Law and that includes bank accounts, savings, houses, the lot so in the case of divorce or death, your aseets will not go where you think they will. I have now placed all my assets in an offshore company, it cost me very little to set up but am now protected for life, worth thinking about. For any of you who want more info, I have been dealing with a guy called xxxxxxxxxxxx, he is red hot and knows his stuff inside out and you can contact him at xxxxxxxxxxxxx@xxxxxxxxxxx He also sorted out my property purchase here and the financing so he's a useful contact to have.
Suspicious advertising for a first post - details removed. 4HP
Suspicious advertising for a first post - details removed. 4HP
Last edited by 4HolerPoler; 9th Jan 2006 at 11:58.
Re: EK Providence Scheme
:-) (-:
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Re: EK Providence Scheme
Reminded me a lot of another threat I read - took me some time to find it again - but here it is:
http://www.pprune.org/forums/showthread.php?t=202573
There are always "better" ways out there to make money... good luck!
http://www.pprune.org/forums/showthread.php?t=202573
There are always "better" ways out there to make money... good luck!
Red hot he may be, but rude!!!
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EK PROVIDENT FUND
EK Provident fund looks like it is on the slide (down) again. Mine has lost about 20 000 USD from when I last looked a few weeks back? Why is this and what do the financial wizz kids amongst us reckon is going to happen?
Thanks
Thanks
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Hang in there
Unless you are planning to leave/retire in the next few year just leave every thing as it is. I suspect that you are quite heavily invested in "managed" equities which are taking a hit worldwide at the moment. There will always be cycles like this which the fund managers are supposed to smooth but they are victims of the system too. Just ride the trough with the waves and dont try to second guess.
If you were planning to retire and withdraw the whole sum short term I would do at least two of the following.
1) Get into cash or bonds (but preferably not USD)
2)Forget the retirement, leave the money in the fund and apply to Mcdonalds.
3) Get down to the EK clinic for a double dose of valium because it is going to get really tense watching and waiting the 10 days that it takes Payroll to action your switching request whilst equities and the dollar screw themselves up into a little ball.
Good luck
If you were planning to retire and withdraw the whole sum short term I would do at least two of the following.
1) Get into cash or bonds (but preferably not USD)
2)Forget the retirement, leave the money in the fund and apply to Mcdonalds.
3) Get down to the EK clinic for a double dose of valium because it is going to get really tense watching and waiting the 10 days that it takes Payroll to action your switching request whilst equities and the dollar screw themselves up into a little ball.
Good luck
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No matter how you slice it, the P fund is not going to take you sailing into the sunset. It might buy you the boat and a cooler full of beer, but the rest is up to you.
It's paid with after tax dollars and is only a moderate contribution at best.
Income from property rentals would be the way to go IMO.
It's paid with after tax dollars and is only a moderate contribution at best.
Income from property rentals would be the way to go IMO.
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Retirement plan at Emirates
Does anyone know the details of the retirement plan better known as the provident fund? How long do you have to be there to be fully vested?
Is it a lump sum amount or a montly benefit? Thanks
Is it a lump sum amount or a montly benefit? Thanks