New Pension Scheme

What the new pension scheme is

The new pension scheme (نظام التأمينات الجديد) is the Saudi Social Insurance Law (نظام التأمينات الاجتماعية) issued by Royal Decree M/273 dated 26/12/1445H (2 July 2024), in force since 3 July 2024 and administered by the General Organization for Social Insurance (GOSI).

The new pension scheme did not replace the earlier regime for everyone at once. It runs in parallel with the laws that preceded it, and each regime has subscribers of its own. That parallel structure is the core of the term: a statement about social insurance in Saudi Arabia is incomplete until it says which of the two regimes it describes. The wider system is set out under social insurance.

Who the new pension scheme reaches: Clauses Second and Fourth of Decision No. 1022

What decides the regime is the employee’s contribution record with GOSI from before 3 July 2024, not the date of the current job and not the date of the current contract. The new pension scheme applies to civil new entrants in both sectors who have no contribution periods from before it took effect.

Council of Ministers Decision No. 1022, the decision that approved the law in its Clause First, draws the boundary in Clause Second, which excludes from the Social Insurance Law two groups: subscribers who have contribution periods from before the law took effect for which they have not been compensated, whether those periods fell under the Civil Retirement Law (Royal Decree M/41) or under the 1421H Social Insurance Law (Royal Decree M/33) or under both, including periods treated as served under either; and pensioners already entitled under either of those laws before it took effect.

Clause Fourth of Decision No. 1022 then keeps the earlier laws in force for those two groups: the 1421H Social Insurance Law (M/33), the Civil Retirement Law (M/41) and the Unemployment Insurance Law (Royal Decree M/18). So an employee who moves to another establishment does not join the new pension scheme by doing so. Their regime follows their record, and the change of employer leaves it where it was. Clause Fifth and Clause Sixth of Decision No. 1022 set out exceptions to Clause Fourth: Clause Fifth for the pensions branch, described further below, and Clause Sixth for the occupational hazards branch.

Two employees can sit in the same office, on the same wage, and pay different rates. A table that prints one figure as “the GOSI rate” is therefore wrong for one of them, whichever figure it prints.

New pension scheme contribution rates by date

Paragraphs (1) and (2) of Clause Third of Decision No. 1022 step the compulsory pensions branch rate up to 22% in total, borne equally by the subscriber and the employer. The dates come from GOSI’s guide to the increase in contribution rates: the first rate applies from 3 July 2024, the date the law took effect, and every later step lands on 1 July, rising by 0.5% on each side each year.

Two further contributions sit on top of the pensions rate and do not step: unemployment insurance (SANED) at 0.75% on each side, and the occupational hazards branch at 2% on the employer alone. Today, therefore, a subscriber under the new pension scheme costs 10.75% on the employee’s side and 12.75% on the employer’s. Under the existing system, which continues for the two groups in Clause Second, pensions stay at 9% on each side, which gives 9.75% for the employee and 11.75% for the employer. The branch by branch tables for both regimes are kept under GOSI contributions.

The figure 10.75% is where a category error can sit. It can be published as “the pensions contribution rate”. The arithmetic is right, since it is 10% pensions plus 0.75% SANED, but the label is wrong, because it is the employee’s total across two branches and not the rate of one branch. In the sources we reviewed, three third party payroll vendor pages gave three different rates for the same date. Reconciling or averaging such figures does not produce a correct one; it hides a category error inside a number. GOSI and the decision are the sources to work from.

Why the new pension scheme shows 2% for unemployment insurance but GOSI shows 1.5%

Article 44(1) of the Social Insurance Law sets the unemployment insurance contribution at 2%, half on each side. Article 44(2) of the Social Insurance Law allows that rate to be amended by decision of the Council of Ministers within a band of 0.5% to 2%, again half on each side. Acting under that power, paragraph (6) of Clause Third of Council of Ministers Decision No. 1022 set the contribution at 1.5% of the contributory wage from the law’s entry into force, borne half by the employer and half by the subscriber.

The rate in force is therefore 1.5% combined, or 0.75% on each side. A reader who opens the Social Insurance Law and finds 2% has not misread it. They are looking at the starting figure in Article 44(1) of the Social Insurance Law, which the decision adjusted under the power that Article 44(2) of the Social Insurance Law itself provides. The full branch is described under SANED.

The contributory wage under the new pension scheme: a stated ceiling and a floor by reference

The ceiling is written into the law. Article 8 of the Social Insurance Law sets the maximum wage or salary subject to contribution at SAR 45,000 a month.

The floor is not written as a number. Article 8 of the Social Insurance Law provides instead that the amount on which contributions are calculated may not fall below the minimum wage or salary set by the competent authority, and the decision fixing that minimum was not among the sources we reviewed. The minimum figure in circulation for the contribution base comes from explanations of the existing system, so it should not be printed beside the rates of the new pension scheme.

A worked example: one wage under the new pension scheme and the existing system

Take a Saudi employee whose contributory wage is SAR 10,000 a month, below the ceiling.

• Uncompensated contribution periods from before 3 July 2024. The existing system applies. The employee’s share is 9.75%, or SAR 975, and the employer’s share is 11.75%, or SAR 1,175.
• First registered on or after 3 July 2024, with no earlier contribution periods. The new pension scheme applies. From 1 July 2026 the employee’s share is 10.75%, or SAR 1,075, and the employer’s share is 12.75%, or SAR 1,275.

Each side pays SAR 100 a month more under the new pension scheme for the same wage in the same month, and the single cause is the employee’s contribution record from before 3 July 2024. On 3 July 2024 the two regimes charged the same pensions rate of 9% on each side, so the gap opened only with the step on 1 July 2025, and on the dated table it widens by another SAR 50 on each side, for this wage, at every step until 1 July 2028. A figure published without its date therefore goes out of date on a known day, and where an establishment’s employees sit on the table needs checking at each step.

The new pension scheme and the retirement age: Clause Fifth of Decision No. 1022

The regime change reaches some existing subscribers as well. Clause Fifth of Decision No. 1022 is an exception to Clause Fourth for the pensions branch alone: subscribers with uncompensated earlier periods of fewer than 240 months, who were under 50 Hijri years of age when the law took effect, receive a new statutory pension age, which is 65 or an age given by a sliding table in the clause, together with new thresholds for an early pension. Those tables are set out in the clause, and the clause is the reference for any individual case.

The conditions of entitlement to a pension under the new pension scheme, the contribution periods it requires and the amount it pays have their own provisions in the Social Insurance Law, and no rule on them is drawn from the definition. The pension benefit is the subject of the annuities branch; the new pension scheme is the change of regime around it.

What the new pension scheme leaves to later decisions

Several parts of the new pension scheme take effect through decisions that the law or Decision No. 1022 refers to. Article 6 of the Social Insurance Law defers the coverage of seven categories, among them domestic workers and workers who are not Saudi and who come to the Kingdom on a temporary or seasonal work visa for no more than sixty days, to a decision of GOSI’s board; those board decisions were not among the sources we reviewed. Paragraph (4) of Clause Third of Decision No. 1022 leaves the start of the occupational hazards branch for civil servants to a later decision of the Council of Ministers. The precise scope of the step on 1 July 2025, by category and by age, was not set out in the official announcement we reviewed. Questions on any of these are for GOSI directly.

The provisions relied on are Articles 6, 8, 44(1) and 44(2) of the Social Insurance Law issued by Royal Decree M/273, and Clauses First, Second, Fourth, Fifth and Sixth and paragraphs (1), (2), (4) and (6) of Clause Third of Council of Ministers Decision No. 1022, both as published in the Umm Al Qura official gazette. The dated rate table is GOSI’s.

This is an explanation of the concept and of the statutory provisions cited, not legal advice.