Retaining foreign workers into retirement is a major opportunity for emerging and established expatriate destinations, with global competition for “silver dollars” set to increase rapidly in the next decade, HR consulting company Mercer said.
Established and emerging retirement destinations have a head start through existing and fast-growing expatriate populations, Mercer's report on The ‘Silver Dollar’ Opportunity: Competing for Retirement Capital said.
By adopting policies specifically designed to incentivise expatriate workers to remain in a jurisdiction through retirement, countries can capitalise on this head start in the competition for “silver dollars”, Mercer said.
UAE launches new gratuity scheme
“For countries building – and growing – a strong expatriate component within their workforce, the ‘silver dollar’ opportunity to retain these workers up to and during retirement should not be overlooked, particularly given the high-earning status of many expatriates,” said Robert Ansari, co-author of the report and partner and head of investments and retirement for India, Middle East and Africa at Mercer.
“They have an advantage in being able to encourage the ‘captive audience’ of workers already living in their jurisdiction to stay through retirement.”
As of 2019, about 169 million workers of all income levels were employed outside of their home country, the International Labour Organisation said.
Of these, more than two thirds, or 67.4 per cent, had moved to high-income countries, with a further 19.5 per cent living and working in upper middle-income countries.
GCC nations have some of the largest expatriate populations as a proportion of the total population globally.
They also feature prominently in the top 20 countries benefiting from wealthy retiring expatriates choosing to extend their residence – alongside Switzerland, Luxembourg, Singapore and Australia, the Mercer report said, citing data from the UAE government and the World Bank.
The UAE, the Arab world’s second-largest economy, has introduced multiple new visas to attract and retain skilled talent.
The golden visa programme was rolled out in 2019. These visas are valid for up to 10 years and aim to encourage exceptional workers and foreign investors to establish deeper roots in the country.
In 2020, Dubai launched the five-year retiree visa for expats older than 55 that allows them to live in the emirate if they fulfil one of three requirements: earn a monthly income of Dh20,000; have Dh1 million in cash savings; or own a property in Dubai worth at least Dh2 million.
Climate, location, quality of life and ease of obtaining retirement visas are important when deciding on where to retire
However, other factors include ease of access to capital, investment opportunities and favourable local savings vehicles and tax regimes.
“Expatriate jurisdictions should consider how a long-term savings vehicle could support wider policy efforts to encourage expatriate workers to remain until and through retirement,” Mr Ansari said.
“However, countries must overcome several complex policy design challenges to ensure that the vehicle provides the scale, flexibility and investment outcomes required as part of a compelling proposition for expatriates, particularly relative to the merits afforded by returning to their home nation or elsewhere.
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“Analysis of existing retirement destinations suggests that a whole-of-economy policy framework that includes strong retirement provisions could help support significant long-term economic benefits.”
Defined contribution pension schemes for expatriates with clear benefits during the accumulation and decumulation phases can contribute to supporting and attracting expatriates up to and through retirement, the report found.
The Dubai International Financial Centre was the first entity in the UAE to set up a new gratuity system when it introduced the DIFC Employee Workplace Savings (Dews) plan in 2020, through a defined contribution funding model to people working within the financial centre.
In 2022, Sheikh Hamdan bin Mohammed, Crown Prince of Dubai, launched a new savings pension plan for non-Emirati employees working in the emirate's public sector, with the scope of expanding it into the private sector at a later date.
Similarly, the UAE Ministry of Human Resources and Emiratisation last year rolled out a savings plan for employees in the private and free zone sectors to invest their gratuities.
Healthcare infrastructure is also a critical factor to consider in designing a system to encourage expatriates to retire in an overseas jurisdiction, Mercer said.
Another factor for attracting expatriates to work in a jurisdiction is favourable tax policies, including no income tax for expatriates in some jurisdictions.
The savings vehicle would need to account for the tax position of expatriates so as not to cause undesirable complexity or higher tax burdens, the report added.
“As countries compete for the retirement capital of expatriates working in their jurisdiction, they will need to ensure there is a robust job market to support a worker remaining in-country,” Mr Ansari said.
“Policymakers should also consider using a social security safety net to encourage workers to stay in-country while they look for new positions.”
In 2022, the UAE announced an unemployment insurance programme, available to both citizens and non-citizens, to provide a financial support system if they lost their jobs.
Workers with a basic monthly salary of Dh16,000 are required to pay Dh60 a year towards the scheme, which pays them a maximum monthly compensation of Dh10,000 for three months.
Those with a monthly basic salary exceeding Dh16,000 are required to pay Dh120 annually and receive up to Dh20,000 for three months.
