|16 May, 2019

Expatriates in UAE elated over planned pension funds

A recent survey revealed that majority of expatriates do not have realistic retirement plans when they finish working

Romantic couple looking out from boat at Dubai marina, United Arab Emirates

Romantic couple looking out from boat at Dubai marina, United Arab Emirates

Getty Images/ Antonio Sab

Dubai resident Erum Mustafa, a 45-year-old single woman, is pleased to know that the Federal Authority for Government Human Resources is planning to set up investment funds for the retirement benefits of expats. She sees the private sector savings programme as "a light of hope at the end of a tunnel".

"For the last 14 years, I have been supporting my family back in Pakistan. Both my sisters are widows, with one child each. My brother passed away last year due to epilepsy. I am the sole breadwinner and I have a lot of responsibilities towards my family. Till date, I couldn't save a single dirham for myself.

"My life is a lesson for all people to save money. Also, there is no one to advise people like me on the importance of saving. So, this is a great move by the UAE authorities. This is the country that gave me a job and, now, it's working on a provision for our retirement life. I laud the way the UAE is looking after its people," said Erum, who is working at a private firm.


"Even as planning for the future is very important, I wonder how this plan will be implemented, especially for those who are living in hand-to-mouth situation. How can I contribute to this new plan when all my salary is going towards family needs?" Erum asked.

Bangladeshi expat Mohammad Moazzem Hossain said there was a need to create awareness among people on the need to save money for rainy days.

"I understand that there is a need to spread the word about the benefits of planning for life after retirement. So, this is a very good plan by the UAE government. People will want to stay here for more years through this plan. I am very interested in this plan. I am sure that a lot of my friends will agree with me," Hossain added.

Great option

Indian resident Neeraj Ritolia felt retirement plans are important for expats who are coming from countries that do not have a compulsory pension scheme for its citizens who live overseas.

"Like in India, once you become a non-resident, you are out of any government pension or retirement schemes," he said.

Ritolia, who is the vice-chairman of ICAI Abu Dhabi Chapter, said most of his friends and colleagues have retirement plans that they have funded themselves.

On the government plan, he said: "I always like having options. I understand that participation in these funds is optional. It will be a great option for those who cannot manage their investments. Whatever additional amount the fund can generate will assist each expat. However, one should be cautious that the fund may result in a negative contribution, unless the it is invested in capital-guaranteed products or in the money market. The fund manager fee should also be kept as low as possible to pass on the benefits to the fund subscribers," he said.

Padmanabha Acharya, president of Indian Business and Professional Group (IBPG), said the proposed plan with respect to gratuity would bring the UAE closer to global best practices.

"The UAE gratuity system for expatriates is currently based on the UAE Labour Law, which results in a defined contribution based on the number of years of cumulative service and the last drawn salary. This is currently unfunded, which could lead to cash flow constraints when a lot of employees leave the company. Setting up an investment fund to manage retirement benefits will achieve many objectives, including enhanced security, better returns and stable capital markets and cash flows. This will also facilitate long-term retention of employees," Acharya added.

A survey by Friends Provident International and YouGov released in March revealed that majority of expatriates in the UAE do not have realistic plans for securing a comfortable lifestyle when they finish working. While the research showed that more than one-third of respondents (34 per cent) expect to be retired by the time they reach the age of 55, and more than half (53 per cent) before they are 60; less than half (48 per cent) are currently saving regularly for their retirement.

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