Expatriates failing to save for retirement, experts say

They warn that everyone should save an amount each month for their retirement.

Renoy Kundukulam, head of Priority Banking at Noor Bank, estimated two in three expats were not planning adequately for when they stop working. Reem Mohammed / The National

ABU DHABI // The vast majority of UAE expatriates are failing to build a nest egg for their retirement, according to financial experts.
Renoy Kundukulam, head of priority banking at Noor Bank, estimated two in three expats were not planning adequately for when they stop working.
"In our opinion, we do not believe that UAE expats have adequately thought about retirement plans," he said. "Retirement planning is not just about buying a retirement plan, it is about how you create a regular stream of income that you need when you retire.
"This could include creating assets that generate regular income, such as property (rental income) or retirement plans (annuity income)."
Mr Kundukulam said many expats failed to realise that retirement planning was important to ensure that they continued to enjoy the same lifestyle after retirement as they did during the days when they were earning a steady income - and to take care of planned events or unforeseen emergencies.
"Various industry surveys suggest that 10 to 15 per cent of a person's income should be set aside for effective retirement planning," he said. "The best time to start planning for a retirement is at the start of one's career because retirement is an eventuality and can last longer than one might expect. Set aside a tenth of your income from this month onwards and lock it up in long-term savings plans."
According to results from a survey published last year by insurance group Zurich, 63 per cent of UAE respondents were not confident they were saving enough for retirement. That figure rose to 75 per cent for Arab expats, who are the most concerned about their pension provision, and is lowest among expats (52 per cent).
Ambareen Musa, founder and chief executive of souqalmal.com, said the lower reliance on retirement plans could also be attributed to property ownership, which is considered a popular source of funding retirement among expats.
"Many people either don't save with a specific retirement goal in mind, or postpone retirement planning till it's too late, and there isn't enough time left to build a comfortable retirement nest egg," she said.
"Life expectancy has increased dramatically over the last two to three decades, and people have to start planning ahead for a longer retirement.
"Covering rising healthcare costs in old age, while still maintaining a good standard of living calls for the current working population to seriously consider building some solid savings."
Ms Musa said expats should save enough to fund their retirement and maintain a standard of living for 20 to 25 years of retired life.
"The first piece of advice would be to start early - the earlier you start saving for retirement, the higher your chances of retiring sooner and more comfortably," she said. "Also spread your investments across different avenues to lower the risk."
Although expats are not eligible for UAE pensions they are instead given an end-of-service pay out, said George Triplow. The Mena wealth and asset manager leader at Ernst & Young said with the average stay of expats in the region extending for a number of reasons, some companies had started offering employees retirement savings schemes.
"Many organisations are mindful of the fact that individuals are very much reliant and tied to their employer in the region, depending on them for visas, and pensions are a strong, long-term incentive and retention tool," he said.
[e-mail]