Six in 10 UAE residents depend on their end of service gratuity payment to fund their retirement, a survey has found, highlighting the major role the benefit plays.
According to the study from financial services companies Old Mutual International and Quilter Cheviot, 59 per cent of those polled either partly or fully rely on the payment for their future plans. The survey polled 130 residents with over $50,000 invested in August last year.
Paul Evans, head of Middle East and Africa region at Old Mutual International, said this “could be a cause for concern, as the research shows that on average they are relatively small payments”.
Nearly nine in 10 of those polled (84 per cent) say they will receive a gratuity when they leave their company, with 62 per cent stating the amount will exceed Dh20,000.
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Read more:
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At the Mena Pensions Conference in Bahrain in October last year, analysts discussed how the end of service gratuity – a defined benefit pension scheme – requires a rethink as it does not factor in the lifespan of an employee, only the years they have worked at a company.
Simon Herborn, senior consulting actuary at Milliman – Middle East and Africa told The National at the time that "the labour law gratuity is unlikely to be an adequate foundation" for a UAE resident's retirement.
Employees leaving an organisation in the UAE are entitled to an end of service gratuity after completing at least one year of service with the tenure calculated on the number of days worked. Those employed by a company between one and five years are paid 21 days of pay based on their final basic salary. After five years, they are entitled to 30 days of pay.
However, for many, this will not be enough to fund their retirement. Eight in 10 plan to continue working in retirement, either for social (45 per cent) or financial reasons (35 per cent) reasons, the study found. Eighty-one per cent said they expect to be self-employed.
Mark Leale, head of Quilter Cheviot’s Dubai representative office, said while self-employment can be a positive experience, it also "presents some challenges and anyone interested in taking on self-employed work to fund their retirement must have a financial plan in place".
This plan should take into account "the possibility that they physically could no longer be able to earn as they get older".
How to fund the retirement gap between the gratuity payment and the amount expatriates actually need has been a subject of debate in recent years. In the past, residents turned to financial advisory companies to top up their pension pots. However, many were mis-sold poor performing long-term savings and investment plans riddled with high fees and hidden charges.
A raft of new regulations proposed in 2017 by the UAE Insurance Authority and the Central Bank of the UAE to clamp down on mis-selling are yet to be imposed.
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The GCC’s gratuity system may evolve from a defined benefit scheme to a defined contribution scheme that places the onus on the individual to save for their future
Salmaan Jaffery, chief business development officer at Dubai International Financial Centre, told The National in October that such as plan will be in place for expats "in the near future".
When it comes to where residents want to retire, 62 per cent favour their home country, according to the study. While 18 per cent of respondents said they would retire in the Emirates, the poll was carried out a month before the UAE unveiled five-year retiree visas for expatriates over the age of 55.
Also, many residents expect to delay retirement. While a 2017 survey from Old Mutual and Quilter Cheviot found 43 per cent expected to retire between the age of 50 to 55, this dropped to 35 per cent in the 2018 poll.
Nearly half said they expect retirement to last between 11 and 20 years. However, with some living more than 40 years after the traditional retirement age of 60, independent personal finance communities such as SimplyFI.org and DeadSimpleSaving.com advocate a low-cost investment approach.
Steve Cronin, the founder of DeadSimpleSaving.com, said: "More and more people are becoming aware that low-cost, passive index-tracking ETFs are the best investment funds for residents."
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Lexus LX700h specs
Engine: 3.4-litre twin-turbo V6 plus supplementary electric motor
Power: 464hp at 5,200rpm
Torque: 790Nm from 2,000-3,600rpm
Transmission: 10-speed auto
Fuel consumption: 11.7L/100km
On sale: Now
Price: From Dh590,000
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Sole survivors
- Cecelia Crocker was on board Northwest Airlines Flight 255 in 1987 when it crashed in Detroit, killing 154 people, including her parents and brother. The plane had hit a light pole on take off
- George Lamson Jr, from Minnesota, was on a Galaxy Airlines flight that crashed in Reno in 1985, killing 68 people. His entire seat was launched out of the plane
- Bahia Bakari, then 12, survived when a Yemenia Airways flight crashed near the Comoros in 2009, killing 152. She was found clinging to wreckage after floating in the ocean for 13 hours.
- Jim Polehinke was the co-pilot and sole survivor of a 2006 Comair flight that crashed in Lexington, Kentucky, killing 49.
The Settlers
Director: Louis Theroux
Starring: Daniella Weiss, Ari Abramowitz
Rating: 5/5
UAE v Gibraltar
What: International friendly
When: 7pm kick off
Where: Rugby Park, Dubai Sports City
Admission: Free
Online: The match will be broadcast live on Dubai Exiles’ Facebook page
UAE squad: Lucas Waddington (Dubai Exiles), Gio Fourie (Exiles), Craig Nutt (Abu Dhabi Harlequins), Phil Brady (Harlequins), Daniel Perry (Dubai Hurricanes), Esekaia Dranibota (Harlequins), Matt Mills (Exiles), Jaen Botes (Exiles), Kristian Stinson (Exiles), Murray Reason (Abu Dhabi Saracens), Dave Knight (Hurricanes), Ross Samson (Jebel Ali Dragons), DuRandt Gerber (Exiles), Saki Naisau (Dragons), Andrew Powell (Hurricanes), Emosi Vacanau (Harlequins), Niko Volavola (Dragons), Matt Richards (Dragons), Luke Stevenson (Harlequins), Josh Ives (Dubai Sports City Eagles), Sean Stevens (Saracens), Thinus Steyn (Exiles)
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
KILLING OF QASSEM SULEIMANI
Zayed Sustainability Prize
ESSENTIALS
The flights
Emirates flies from Dubai to Phnom Penh via Yangon from Dh2,700 return including taxes. Cambodia Bayon Airlines and Cambodia Angkor Air offer return flights from Phnom Penh to Siem Reap from Dh250 return including taxes. The flight takes about 45 minutes.
The hotels
Rooms at the Raffles Le Royal in Phnom Penh cost from $225 (Dh826) per night including taxes. Rooms at the Grand Hotel d'Angkor cost from $261 (Dh960) per night including taxes.
The tours
A cyclo architecture tour of Phnom Penh costs from $20 (Dh75) per person for about three hours, with Khmer Architecture Tours. Tailor-made tours of all of Cambodia, or sites like Angkor alone, can be arranged by About Asia Travel. Emirates Holidays also offers packages.
Labour dispute
The insured employee may still file an ILOE claim even if a labour dispute is ongoing post termination, but the insurer may suspend or reject payment, until the courts resolve the dispute, especially if the reason for termination is contested. The outcome of the labour court proceedings can directly affect eligibility.
- Abdullah Ishnaneh, Partner, BSA Law
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Last 10 winners of African Footballer of the Year
2006: Didier Drogba (Chelsea and Ivory Coast)
2007: Frederic Kanoute (Sevilla and Mali)
2008: Emmanuel Adebayor (Arsenal and Togo)
2009: Didier Drogba (Chelsea and Ivory Coast)
2010: Samuel Eto’o (Inter Milan and Cameroon)
2011: Yaya Toure (Manchester City and Ivory Coast)
2012: Yaya Toure (Manchester City and Ivory Coast)
2013: Yaya Toure (Manchester City and Ivory Coast)
2014: Yaya Toure (Manchester City and Ivory Coast)
2015: Pierre-Emerick Aubameyang (Borussia Dortmund and Gabon)
2016: Riyad Mahrez (Leicester City and Algeria)
The Way It Was: My Life with Frank Sinatra by Eliot Weisman and Jennifer Valoppi
Hachette Books
