83% of UAE employees believe the gratuity does not provide enough funds to cover retirement expenses

Only one in five employees plan to use their gratuity towards their retirement costs

UAE Employers should pick up the challenge of creating a retirement savings culture

Dubai, UAE; February 22, 2015: The vast majority of employees in the UAE (83%) believe that the end of service gratuity ('gratuity') is an inadequate method of saving for their retirement years. Only 17% of employees believe the gratuity provides enough funds to cover the cost of retirement, according to research released today by Zurich International Life.

The survey of 1,000 UAE residents also found that only one in five respondents (22%) will use their gratuity towards the cost of funding their retirement. Instead, almost a quarter of employees (24%) plan to use their gratuity as a deposit to buy a property, while 22% will use it to pay off debt. Another 8% will pay school fees, rent or another bill, while 7% will spend their gratuity on a holiday or large luxury item.

What will you do with your gratuity

when you leave your current job?

1. Use as a deposit to buy a property (24%)

2. Pay off debt (22%)

3. Use as part of my retirement fund (22%)

4. Pay school fees, rent or another bill (8%)

5. Spend on a luxury item or holiday (7%)

Western expats were the most likely to use their gratuity towards retirement costs (32%), whereas Arab expats were the least likely (11%). The research also found that Asian expats were the most likely to use their gratuity as a deposit for a property (27%).

The research points to a lack of a retirement savings culture in the UAE, which is supported by a recent Zurich study that found only 33% of UAE residents have a formal retirement plan.

In Europe and North America, the retirement savings culture is facilitated by employers who provide retirement savings schemes for their employees. But most employers in the UAE do not provide their employees with an opportunity to save for their retirement; instead they consider the gratuity to be a satisfactory alternative.

Peter Cox, Head of International Pensions at Zurich International Life, challenged UAE employers to create a retirement savings culture in the Emirates to avoid the population, and in particular expats, heading towards a "retirement funding time bomb".

"It is very concerning that the majority of UAE residents do not have a retirement savings plan; nor use their gratuity towards their retirement. There needs to be a significant shift in attitude to encourage a savings culture to defuse this retirement funding time bomb. Employers can help to facilitate this cultural shift by providing a cost effective way for their employees to save for their retirement rather than just focusing on paying their gratuity liability," said Cox.

Under UAE Labor Law, employees are entitled to a gratuity at the end of their employment if they have completed one or more years of continuous service. The gratuity rises depending on your length of service and is linked to your basic salary, excluding allowances, bonus and commission payments, making it difficult to calculate. In fact, the research found that almost two-thirds of employees (59%) do not know the value of their gratuity.

Cox warned that even those individuals who do use their gratuity towards their retirement funding should not consider the amount they receive enough to comfortably sustain them through retirement.

What is the End of Service Gratuity?

The End of Service Gratuity is a payment based on an employee's last basic salary and the length of service. It does not take into account any allowances such as housing or school. However, anyone receiving a guaranteed or regular commission may have this included in the calculation.

Employees must complete 12 month's service to qualify. They then receive 21 days' salary for each year of service. This increases to 30 days after five years of service. The amount paid out is reduced for employees that resign before five years has passed. Those that work between one and three years are entitled to one-third of their payout and those that work between three years and five years, receive two-thirds. The maximum possible payout is two years' salary.

About Zurich Insurance Group:

Zurich Insurance Group (Zurich) is a leading multi-line insurer that serves its customers in global and local markets. With more than 55,000 employees, it provides a wide range   of general insurance and life insurance products and services. Zurich's customers include individuals, small businesses, and mid-sized and large companies, including multinational corporations, in more than 170 countries. The Group is headquartered in Zurich, Switzerland, where it was founded in 1872. The holding company, Zurich Insurance Group Ltd (ZURN), is listed on the SIX Swiss Exchange and has a level I American Depositary Receipt (ZURVY) program, which is traded over-the-counter on OTCQX. Further information about Zurich is available at www.zurich.com.

For further information, please contact:
Sean McAllister
Head of Communications, Middle East
Zurich Insurance Group
Direct: +971 4 455 7552
Mobile: +971 56 175 3640
Email: sean.mcallister@zurich.com

Liam Turner / Tom Drummond
ASDA'A Burson-Marsteller
Dubai, UAE
Tel: +971 4 450 7600
Fax: +971 4 435 8040
Email: liam.turner@bm.com / tom.drummond@bm.com

© Press Release 2015