Covid-19 accelerates urgency of people wanting to retire in secure countries

When Kiran Viswam, an Indian supply chain analyst who has lived in Dubai for 25 years, heard about the emirate's recently announced retirement visa, he knew it was the solution to his long-term financial goals.

"I don't want to move to another country after retirement and start from scratch," Mr Viswam, 38, tells The National. "I would rather buy the Dubai retirement visa and enjoy the city's lifestyle and quality of life in my twilight years.

“The retiree visa will also facilitate business continuity. I can pass on my business to my children, retire in Dubai and live with my family in the city I am accustomed to, rather than going back home,” he says.

Mr Viswam says that the investment requirements announced by the Dubai government will help expatriates to start saving towards their retirement goals. However, he says competitively priced health insurance packages are needed for retirees to consider settling down in Dubai since healthcare costs for the elderly can spiral.

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Mr Viswam is the type of investor that Dubai is aiming to eventually attract with its retirement visa. Non-Emiratis over the age of 55 should meet one of the following three financial requirements to be eligible for a five-year renewable retiree visa: they should earn a monthly income of Dh20,000, have savings of Dh1 million or own a property in Dubai worth Dh2 million. They should also have valid UAE health insurance.

Dubai’s retirement initiative will rival similar programmes in the Caribbean and in European countries such as the UK, Portugal, Greece, Cyprus, Spain and Malta, whose citizenship-by-investment programmes are sought after by affluent retirees.

Most applicants seeking citizenship or permanent residence want benefits such as free health care, free education, low taxes and visa-free travel.

The Covid-19 pandemic has led to a growing urgency on the part of people who wish to migrate to or retire in these destinations, say agencies that help applicants with the residency programmes.

“We have seen 45 per cent more enquiries since the onset of the Covid-19 pandemic. Most of the applicants are showing urgency for their application,” says Paul Christodoulou, chief executive of Aqua Properties, which offers citizenship-by-investment programmes.

“The pandemic accelerated the market in a way that people have started looking for a better option where they can secure their future – financially and socially. Acquiring second citizenship adds an advantage in protecting their health and lifestyle.”

Some countries that offer such programmes have also lowered their investment requirements after the economic impact of Covid-19.

“Most citizenship-by-investment programmes in Caribbean [countries] such as St Kitts & Nevis, Antigua and Barbuda and the Commonwealth of Dominica and St Lucia have aggressively decreased their required investment amounts by an average of 15 per cent in the past two months,” says Veronica Cotdemiey, chief executive of Citizenship Invest.

“No other country has made any adjustment to their required investments or costs.”

While the average age of applicants for citizenship-by-investment programmes ranges from 45 to 60, young people in their 20s also inquire on behalf of their parents to acquire citizenship for the family, according to Ms Cotdemiey.

Many of these programmes offer residency or citizenship through property investment, but in the UK the applicant is required to make an investment in a business and elsewhere payments are made to governments.

All applicants must go through due diligence and background checks and the cost varies from country to country.

As a guideline, the verification costs range from $4,000 (Dh14,690) to $7,500 per adult, says Ms Cotdemiey.

“There are also government processing fees, which vary depending on the country and the programme, ranging from $1,000 to $35,000,” she says.

With Dubai announcing its retiree visa programme, it could also encourage more residents to bring back their offshore earnings to the UAE. However, personal finance experts still advise expatriates to continue using offshore banking solutions.

“They provide a high level of security, service, convenience and access to well-diversified global funds and investments,” says Stuart Ritchie, director of wealth advice at AES International.

He says that expatriates who intend to retire here through the retirement visa scheme will have to start analysing the long-term cost of living in Dubai compared to their home countries.

“It is crucial that expats are mindful of the expenses associated with living in the UAE. Once residents retire, their medical insurance costs will increase and they will need to allocate more money to cover this cost,” Mr Ritchie says.

“However, retirees can continue to benefit from the tax-free status of Dubai residency, in terms of income and investments, where they may have suffered tax when drawing their retirement income in their home country.”

There are many avenues for expatriates to generate comfortable levels of retirement income, says Mr Ritchie. The most common ones include pensions, investment funds, annuities and cash savings.

How to meet the eligibility criteria for retiree visa

If you have more than a few years before retirement, then investing sensibly in stock and bond funds is the fastest way to grow your money over the long term without taking excessive risk on investments, says Steve Cronin, founder of DeadSimpleSaving.com.

“If you invested Dh4,000 per month into global stock and bond funds, and made 6 per cent a year after fees, then you would have Dh1m in 14 years. If you invested Dh10,000 per month, you could do it in seven years,” he adds.

You can also generate Dh20,000 in monthly income through property, stocks, bonds or dividends from businesses that you own.

“To earn Dh20,000 from [property], you would need to make Dh240,000 [in rent] from a property worth Dh4.8m, assuming a 5 per cent rental yield. You could get this down to around Dh3.4m if you could achieve a 7 per cent rental yield, but that may be increasingly hard to achieve,” Mr Cronin says.

However, keep in mind that you would also need to pay agent fees, service charges and mortgage instalments. To earn Dh20,000 from a stock and bond portfolio, Mr Cronin says you would need to apply the 4 per cent rule, taking out 4 per cent of your initial portfolio on retirement and then adjusting the amount you take out every year for inflation.

“So, you would need Dh6m in your portfolio and initially a mix of 60 per cent global index exchange-traded funds and 40 per cent global bond ETFs,” he says.

“You might have to convince the authorities that this was a valid source of income, though you could always liquidate some of it to get Dh1m in cash to pass your visa assessment.”