Savers warn of hidden fees when investing

Life assurance policy falls well short of what investor had hoped to gain in warning to others

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Many expats have lost tens of thousands of dirhams after being mis-sold pension plans by rogue individuals presenting themselves out as Independent Financial Advisors.

One of those is Robert, a British lawyer who moved to Dubai 11 years ago. He asked that his surname not be used.

He opened a regular savings plan ten years ago, but claims a large chunk of his cash was swallowed up in hidden fees and ‘leakage’ costs, unknown to him at the time of signing up.

Robert was sold a life assurance product from that looked good on paper, but has produced very little in the way of saving for his retirement.

“I was targeted by a smooth talking silver tongued IFA,” he said.

“He was quick out of the blocks to show my projected returns if I saved on a monthly basis and committed to a 25 year term."

“What he did not discuss were the substantial costs and fees involved with the product which would eat away at any future potential saving returns of the underlying funds I chose to invest in through the platform.”

Robert decided to contribute Dh3,500 every month for 25 years. But the last ten years, he has seen a 'leakage' from his savings plan of approximately Dh75,000 - a combination of annual transaction fees, administration fees and investment fees averaging about 5 per cent on Robert’s annual contributions.

Commissions paid to IFA’s to sell saving plans, and paid directly by the plan’s sponsors upfront, are believed to be in the region of Dh45,000.

Since taking out the savings plan a decade ago, Robert has paid in more than Dh420,000, but the market value of the plan is now just Dh415,500.

“No sooner had I signed on the dotted line, the IFA disappeared from sight,” Robert added.

“By telling my story, hopefully I’ll be able to deter the unknowing and unsuspecting expat caught in the nets of calculating IFAs who are peddling a commission driven savings product which benefits the IFA and the saving plan’s sponsor - but not the investor."

“Expats should be aware of the hidden costs which may seem low at 3 - 5 per cent, but which have a huge impact on the performance of their savings."