One of the most common questions employees ask as retirement approaches: "How much will my monthly pension actually be?" The new Social Insurance Law answers this with a precise, defined mathematical formula, not an estimate.
📜 The Core Formula: 2.25% Per Year of Contribution
Article 17 of the Law sets out the decisive formula for calculating your pension:
"The pension provided for in Article (16) is calculated by multiplying (2.25%) by the average wage or salary subject to contribution determined under paragraph (1) of Article (16), by the number of months of contribution, dividing the result by (12), provided the pension does not exceed (100%) of that average."
In simpler terms, the formula is:
Monthly pension = 2.25% × average wage × (number of years of contribution), capped at 100% of the average wage.
Example: 20 years of contribution × 2.25% = 45% of your average wage. 30 years = 67.5%. Roughly more than 44 years brings you to the maximum cap of 100%.
📊 How Is the "Average Wage" Calculated?
The average is not just your current salary — it is based on your recent employment history:
"The pension is calculated on the basis of the average of the highest wages or salaries subject to contribution over (180) months of the contribution period."
This means the institution looks at your highest contribution-subject wages over the last 180 months (15 years) of your career and calculates their average — not just your last salary, nor the average of your entire career.
Article 17(2) sets guaranteed limits: if your contribution period reaches 480 months (40 years) or more, your pension will not be less than 4,000 SAR per month, regardless of how low your average wage is. This minimum decreases gradually by 3% for every 12 months of contribution short of 480 months, down to an absolute minimum of 2,000 SAR for someone who has reached only the minimum qualifying period (180 months of contribution).
⏱️ When Can You Get Your Pension Before Reaching Retirement Age?
Article 16(3) gives you important flexibility: if your contribution period reaches 360 months (30 years) or more, you are entitled to receive your pension before reaching the statutory eligibility age — without waiting for the full age — up to a maximum of 120 months (10 years) before the statutory age, if you stop work subject to the Law.
✅ What Should You Do to Estimate Your Future Pension?
- Calculate the average of the highest contribution-subject salary you earned over the last 15 years (180 months) of your work.
- Multiply this average by 2.25%, then by your actual number of years of contribution.
- Remember the result will not exceed 100% of your average wage no matter how long your service.
- If your contribution period is 30 years or more, check the early-retirement option before reaching the statutory age.
- Use Sanad to get a precise estimate of your future pension based on your current employment situation.
- Social Insurance Law, Royal Decree No. M/273 dated 26/12/1445H — Articles 16 and 17