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Oct 9, 2026 · @Someone
What Is Saudi Arabia’s New Retirement System?
The new retirement system is the Social Insurance Law issued by Royal Decree (M/273) dated 26/12/1445 AH. It has been in force since 3 July 2024 and applies to civilians joining the labor market for the first time, in both the public and private sectors.
The new system combines what used to be two separate schemes: the Civil Retirement System for government employees and the Social Insurance System for private sector employees. Retirement rules for new joiners are now unified under the General Organization for Social Insurance (GOSI), after the Public Pension Agency was merged into it.
Current retirees are not affected, and most current employees stay on their previous systems. The exception is one specific group whose retirement age is being raised gradually (details in the next section).
The system at a glance:
- Effective date: 3 July 2024 (27/12/1445 AH).
- Responsible body: the General Organization for Social Insurance (GOSI).
- Statutory retirement age: 65 (Gregorian years) for those covered.
- Contribution rate: rising gradually from 9% to 11% for both employee and employer by July 2028.
- Pension: calculated at 2.25% for each year of contributions.
Who Does the New Social Insurance Law Apply To?
The new law applies in full to anyone with no contribution period before 3 July 2024, while one group of current employees is affected by part of its provisions only. Where you stand depends on your contribution period and age on the effective date:
| Group | What changes? |
|---|---|
| Current retirees and their beneficiaries | Nothing. They keep the same benefits |
| Current employees with fewer than 240 months (20 years) of contributions and under 50 Hijri years of age | They stay on their previous system, but their retirement age rises gradually to between 58 and 65, and the service needed for early retirement rises to between 25 and 30 years |
| All other current employees | No change. They remain on the Civil Retirement or Social Insurance system |
| New joiners with no previous contribution period | Fully covered by the new system |
The new law covers civilians. Military personnel have a separate retirement system with different conditions and retirement ages depending on rank.
Key Changes in the New Retirement System
Four changes affect employees directly: the retirement age, the deduction rate, how the pension is calculated, and the conditions for early retirement. The law also adds new benefits, most notably maternity compensation.
| Item | Under the new system |
|---|---|
| Statutory retirement age | 65 Gregorian years |
| Early retirement | Allowed up to 10 years before the statutory age (from age 55) with 360 months of contributions |
| Annuities branch contribution rate | Starts at 9% from the employee and 9% from the employer, rising 0.5% a year to 11% each |
| Pension accrual rate | 2.25% of average wage for each year of contributions |
| Average wage basis | 180 months (15 years) of the contribution period |
| Maximum contributory wage | SAR 45,000 per month |
| Maternity compensation | 3 months at childbirth, paid by GOSI instead of the employer |
The least visible change in the table is the unified track. Previously, moving from a government job to a private sector job (or the reverse) meant moving between two systems with different conditions and calculations. A new employee can now move between the two sectors while their insurance rights stay under one system, so no contribution period is lost because of a change of employer.
Deduction Rates Under the New Social Insurance System
Since July 2026, an employee covered by the new system has 10% deducted for the annuities branch and 0.75% for SANED (unemployment insurance), a total of 10.75% of the contributory wage. The annuities share rises by 0.5% every July until it reaches 11% in July 2028:
| From | Employee share (annuities) | Employer share (annuities) |
|---|---|---|
| 3 July 2024 | 9% | 9% |
| 1 July 2025 | 9.5% | 9.5% |
| 1 July 2026 | 10% | 10% |
| July 2027 | 10.5% | 10.5% |
| July 2028 | 11% | 11% |
On top of these rates, both the employee and the employer pay 0.75% for SANED, and the employer alone pays 2% for occupational hazards. Once the increases are complete, total deductions reach 11.75% for the employee and 13.75% for the employer.
The contributory wage includes basic salary, housing allowance and monthly commissions. A new employee with a contributory wage of SAR 10,000 currently has SAR 1,075 deducted each month, rising to SAR 1,175 in July 2028.
How Is the Pension Calculated Under the New System?
The pension is calculated by multiplying the average contributory wage by 2.25%, then by the number of contribution months, and dividing the result by 12.
Monthly pension = (average contributory wage × 2.25% × contribution months) ÷ 12
Example: an employee with an average wage of SAR 10,000 who contributed for 30 years (360 months). Their pension = 10,000 × 2.25% × 360 ÷ 12 = SAR 6,750 a month, or 67.5% of their average wage.
What this means in practice: the pension is no longer tied only to the salary at the end of your career, but to the average over a long stretch of it. An employee whose salary jumps in the final years won’t see that fully reflected in their pension, while someone who keeps a high, stable wage for many years benefits. And since the accrual rate is 2.25% per year, a contributor needs about 44 years of contributions to reach the cap of 100% of their average wage.
How to Close the Gap Between Your Pension and Your Salary
Under the new system, the pension covers about 67.5% of the average wage after 30 years of contributions, so many new employees will need extra saving and investing during their working years to maintain their income after retirement. The simplest way is a fixed monthly contribution to an investment fund or an automatically managed portfolio, started early and continued for many years, because time matters more here than the amount.
Options available in the Saudi market include Derayah Smart, the robo-advisor service from Derayah Financial, a firm licensed by the Capital Market Authority, as well as its public funds such as the Derayah Saudi Equity Fund. Whatever option you use, match its risk level to the time left until your retirement: more growth early in your career, and less volatile instruments as retirement approaches.
Early Retirement Under the New System
For those covered by the new system, early retirement requires 360 months (30 years) of contributions and can’t start before age 55. For current employees in the group affected by the amendments, the required service ranges between 25 and 30 years, depending on their age and contribution period.
Why Did the Retirement System Change? The Impact on the Saudi Economy
The first goal of the new system is the long-term sustainability of pension funds. As life expectancy rises and the number of retirees grows, any pension system pays benefits for more years than it was designed for. Raising the retirement age adds contribution years and reduces payout years, raising rates increases revenue, and the lower accrual rate with a long average wage keeps future obligations in check. At the same time, the law states that the government covers the actual deficit, with Council of Ministers approval, if assets are not enough to cover benefits, which reassures contributors about their rights.
The second goal is labor market flexibility. Unifying the system across both sectors removes a barrier that made some employees hesitate to leave government jobs for fear of losing retirement benefits, which supports the Vision 2030 goal of raising the private sector’s share of the economy and of employment. Moving the cost of maternity leave from the employer to GOSI also removes one reason companies hesitated to hire women.
On the other hand, there is a direct effect on income: a new employee’s take-home pay falls slightly with each deduction increase, and employers’ hiring costs rise by the same rate. That is why the increases were spread over four years instead of applied at once, to soften the impact on both sides.
Frequently Asked Questions About the New Retirement System
Does the new retirement system apply to current employees?
No, the new system applies in full only to new joiners. However, anyone with fewer than 20 years of contributions and under 50 Hijri years of age on 3 July 2024 sees their retirement age and early retirement requirement change gradually, while the rest of their previous system’s rules stay the same.
When did the new retirement system start?
The system took effect on 3 July 2024 (27/12/1445 AH). Annual contribution increases started on 1 July 2025 and continue until July 2028.
Why do people search for the “1445” and “1447” retirement system?
Because the Royal Decree was issued in 1445 AH, while the gradual contribution increases fall in 1446 AH and the following years up to 1450 AH. It is one system, and the years refer to its implementation stages.
Where can I find the text of the new Social Insurance Law?
The official text is published on the Bureau of Experts at the Council of Ministers platform, and GOSI publishes an explanation of its provisions on its website. Download the PDF from there rather than relying on unofficial copies.
How do I know which system I’m on?
The rule is simple: if you had any contribution period under Civil Retirement or Social Insurance before 3 July 2024, you are on your previous system. To check your contribution periods and your retirement age, review your data in the individual services on the GOSI website or app.
Conclusion
For a new employee, the new retirement system means more working years and slightly higher deductions, in exchange for a single system that moves with them between sectors and broader benefits such as maternity compensation. For the Saudi economy, it is a step toward more sustainable pension funds and a more flexible labor market. If you are a current employee, the most important thing to check is whether you fall within the group affected by the retirement age change.
This article is for general awareness. The final reference for calculating your rights is the General Organization for Social Insurance.
Sources
- Okaz: GOSI explains the Council of Ministers decision on the new system
- Saudipedia: Who does the new Social Insurance Law apply to?
- Al Eqtisadiah: Contribution increases in the annuities branch begin
- Okaz: Deduction rises to 10% from July
- Okaz: How the pension is calculated under the new system
- Amlak: Text of the new Social Insurance Law
