Retirement Planning in Saudi Arabia: What GOSI Covers, and the Gap It Leaves

The GOSI pension is the backbone of retirement for most employees in Saudi Arabia, but it was designed as a foundation rather than a complete plan. It is calculated on part of your pay, it has a ceiling, and it knows nothing about what you actually spend or what your family will need. The question that decides the quality of a retirement is not only “what will GOSI pay me?” but “how far is that from what I will need, and how will I close the difference?”

This guide answers both, in order. An Arabic version is also available.

1. Know what builds your pension and what does not

GOSI calculates contributions and benefits on the contributory wage: basic wage plus housing allowance, with a floor of SAR 400 and a ceiling of SAR 45,000 a month. Two consequences are easy to miss.

• Other allowances do not count. Transport, special-duty and similar allowances, however large, build no pension. If a big share of your package is paid as allowances, the pension is measured on a smaller base than you might assume.
• Pay above the ceiling does not count. A senior earner above SAR 45,000 of contributory wage receives a pension calculated on the ceiling, whatever the actual salary.

2. Estimate the pension

The Social Insurance Law that took effect on 3 July 2024 created a new system for people entering the workforce from that date. Everyone already contributing stays on the existing formula.

• Existing system: one fortieth, or 2.5%, of the average contributory wage for each year of contributions, averaged over the last 24 contribution months, reaching the 100% ceiling at 40 years.
• 2024 system: 2.25% a year, averaged over the highest 180 contribution months, with a retirement age of 65 Gregorian years.

A worked example under the existing system. An employee with a basic wage plus housing allowance of SAR 30,000 a month retires after 25 years of contributions. The estimated pension is 25 × 2.5% = 62.5% of SAR 30,000, or SAR 18,750 a month. If the full package including other allowances is SAR 40,000, the pension replaces about 47% of actual pay, not 62.5%.

Try your own figures in the GOSI pension calculator.

3. Measure the gap against spending, not salary

The ratio that matters is pension to spending. To estimate it:

1. Estimate monthly spending in retirement at today’s prices. Some costs fall, such as commuting and possibly a mortgage once cleared. Others rise: healthcare, travel, support for children and parents.
2. Subtract the expected pension. The result is the monthly gap.
3. Multiply by the years of retirement. Someone retiring at sixty is planning for twenty or thirty years.
4. Allow for inflation. A riyal today will buy less in twenty years. A prudent plan assumes the purchasing power of a fixed income erodes and builds in a margin for it.

In the example above, if the employee expects to spend SAR 28,000 a month in retirement, the gap is SAR 9,250 a month, or SAR 111,000 a year before inflation. That is the number the plan is built around.

4. Decide what closes the gap

The end-of-service award

For private-sector employees, the end-of-service award is often the largest single cash sum of a working life. Under the Labour Law it is half a month’s wage for each of the first five years and a full month’s wage for each year after, on the last wage. It grows with tenure, and it deserves to be planned as retirement capital rather than spent as a windfall.

Regular saving

A fixed monthly contribution, invested in an allocation suited to the time horizon, closes most of the gap for most households. The earlier it starts, the smaller it needs to be.

Assets you already own

Rental property, a family-business stake and existing portfolios can all feed retirement income. The plan needs to know which produce regular income, which would need to be sold, and when.

5. Build in zakat and family commitments

Savings and investments that reach the nisab and complete a lunar year are subject to zakat each year, so a sound plan treats it as a known annual outflow. Our guide to zakat on investments explains the calculation. Saudi households also often carry commitments past retirement: children’s education and weddings, and care for parents. These are not surprises. They belong in the plan with amounts and dates.

How Vault Saudi helps

Vault Saudi Limited Company is licensed by the Capital Market Authority for advisory activity (licence 25313-20). We build a written retirement plan from your real numbers: expected pension, expected end-of-service award, spending and existing assets. Then we size the gap and set the strategy to close it. Your assets stay in your name with the institutions you choose; we do not hold client money or execute trades on your behalf. Your first plan is complimentary, and ongoing advice is SAR 100 a month.

See how financial planning works and what it costs, or talk to an advisor.

This article is for information only and is not investment, legal or Sharia advice. Figures reflect GOSI’s published rules at the time of writing and may change. Check your own record in your GOSI account before acting.