Sunday, Apr 07, 2013
Consumers in the UAE are bracing for a bleak retirement even as the economy shows signs of improvement and individual incomes are higher than in the previous years.
New data show that a significant number of residents are realizing that they have no sufficient savings to retire comfortably. Financial experts attributed the lack of confidence to poor savings culture and absence of proper pension system in the country. Dropping property values and tightening lending rules are also making people realize that they won’t have enough assets to fall back on by the time they stop working.
The 2012 Global Workforce Study by Towers Watson, which surveyed 1,001 employees from large to midsize companies in the country, found that only 37 per cent of respondents are confident of having enough financial resources to last 15 years into retirement.
Over half of the respondents are worried about their “future financial state”, while a similar proportion (53 per cent) agree that retirement security has become a higher priority for them over the last three years.
“The global financial crisis has had a significant economic impact on many individuals, undermining their financial security both now and into retirement,” the study said.
More than half of employees (51 per cent), however, said they are willing to set aside a bigger portion of their income each month to ensure they are financially prepared for retirement.
Vincent Wilson, vice president of Globaleye, which provides financial planning solutions, acknowledged that majority of the expatriates in the UAE don’t have adequate retirement savings. In fact, only a very small number will take the time to sit with a finance professional and do a proper retirement analysis.
Many people are, however, beginning to accept “the reality that in most cases they have not built up sufficient assets” that will help them sustain their living standards in retirement.
“Before the financial crisis, many people relied on the equity they had built up in their property assets or they intended to acquire property assets as a way to fund their retirement. Post crisis, there has been a large fall in property values and it has become harder to buy property as bank lending has tightened,” Wilson told Gulf News.
“This has served to highlight a problem that had long existed but had been under-appreciated - that people have not and do not save enough for their future,” he added.
While poor savings culture and lack of proper pension system can be partly blamed, the main underlying problem is that many people don’t yet fully grasp that the circumstances surrounding them have changed and they must be “more proactive with their retirement planning than the previous generation.”
“In the last few decades, retirees have had their retirement incomes underpinned by a healthy property market, a relatively healthy government pension system and the prospect of inheriting some assets from parents, therefore a token amount of private saving for retirement was sufficient,” said Wilson.
“The world is very different now. Property markets are depressed and tighter credit conditions ensure another property boom is unlikely, the vast majority of government pension schemes are stretched to breaking point due to an ageing population and improved mortality rates mean assets that might have been passed to the next generation are whittled away through long-term care and increased medical costs.”
By Cleofe Maceda Senior Reporter
Gulf News 2013. All rights reserved.
