Start saving now! Nearly half of UAE expats not financially prepared for retirement

New study highlights lack of financial awareness among professionals in the country

Image used for illustrative purpose. A pile of AED one dirham coins is seen in Dubai.

Image used for illustrative purpose. A pile of AED one dirham coins is seen in Dubai.

REUTERS/Jumanah El-Heloueh

Many expatriates in the UAE are not financially prepared for retirement, leaving them at risk of declining living standards during old age, a new study revealed.

Global consultancy firm Mercer conducted a survey among 550 professionals and found that nearly half (45 percent) of foreign workers in the country have no plans for retirement, while the majority (61 percent) are not doing any long-term savings. 

The findings, Mercer said, indicate that there is a lack of financial awareness among professionals in the country.

“With an increasing number of expats remaining in the region for longer durations and closer to retirement age, planning for retirement is becoming a more pressing issue,” said Tarek Zouiten, retirement business leader at Mercer UAE.

‘Very concerning’

Planning for retirement is an essential part of a stable financial life. It ensures that people can maintain the same level of lifestyle, as well as pay for their healthcare bills, after they quit working during old age. 

The number of expat employees in the UAE who have not prioritised retirement planning is “very concerning,” especially since the current end-of-service benefits aren’t financially sustainable for future retirees, Mercer said.

What is worrying is that the study found that nearly half (43 percent) of expatriates are counting on their gratuity to meet their long-term financial needs.

“Employees must understand that the current end-of-service benefits are far from enough to ensure an adequate standard of living post-retirement,” Mercer pointed out. 

“For instance, under the current programme, serving a company for 25 years will only provide two years of basic salary. However, an average person will need 12 times their total salary to maintain a decent standard of living post-retirement,” the firm noted.

While the gratuity system is not enough to provide financial support for retirement, the UAE also does not have a mandatory pension scheme for private-sector employees. Pension systems in many markets worldwide have been put in place to ensure citizens have funds to dip into to support their needs and meet day-to-day expenses by the time they stop earning a monthly income.

When to start saving

Nigel Green, CEO and founder of deVere Group, which provides financial planning services, said it is important that people start saving for retirement as soon as they can, regardless where they are at in their working lives. 

“The time to start saving is now, because the earlier you begin, the easier it will be to reach your long-term objectives,” Green told Zawya.

“It is never too late to start saving for your future. There is a myriad of financial solutions that help you secure financial freedom in retirement at whatever age you are,” he added.

According to Zouiten, helping expats with financial advice, education and tools to help ensure they can enjoy the same quality of life attained in the UAE when they return home may generate good will, help build loyalty and ultimately ensure longer in-country tenure.

“The UAE government also has a key role to play in further educating the public on the importance of savings and encouraging employers to adopt incentives that encourage the right behaviors within their workforce,” he added.

(Reporting by Cleofe Maceda; editing by Seban Scaria)


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