UAE expats’ retirement funding time bomb - work harder and for longer
UAE Residents say they do not believe their end of service gratuity will meet the needs of their retirement. That is according to a new poll from the insurer Zurich International Life. Of the 1,000 surveyed, 83 per cent said the bonus they receive, when they end employment with a company here, is inadequate to fund their pensionable years.
So what is the solution for those not wise enough to put an extra portion of their income aside for the golden years? Well, according to Chris Ferguson, director of Credence International, based in Dubai, we’re just going to have to work harder or longer than we’d initially planned. Here he explains why:
“A 2014 survey conducted by Wells Fargo revealed that 22 per cent of middle class Americans say they prefer an early death to retiring without enough money to help them live a comfortable life.
This is just how depressing the situation has become not just for those living in America but also in other countries around the world. After retiring, the primary source of income for most citizens in the different countries is mostly their personal savings. Only a minority, 30 per cent, would rely on social security as their primary source of income.
The ‘cost’ of retirement over the years has been on the increase due to various reasons; prime of these include the depreciating value of currencies due to factors such as inflation and the increase in debts accrued by individuals such as mortgages and loans.
Many countries are now reviewing their retirement ages upwards with Australia recently proposing to increase their retirement age to 70. This comes just a few months after Greece undertook austerity measures and rose their official retirement age to 67 like Denmark from the previous 65.
Finland has its retirement age set at 68, an increase from 62. The lowest retirement age in the world is 58 which is in Nepal, with these ages being the bare minimum before one can claim a pension. Here in the UAE, the retirement age is 65.
An emerging trend over the years has seen those who think they are going to retire with less money than they planned choosing to take on two or more other jobs in the run up to quitting work. This is because they either work longer hours on various jobs or accept they will have to live a lower standard of living than planned and depend on their government’s social security system. The other option of course is to simply work past the retirement age.
To ward off this scenario, UAE residents should decide the kind of retirement lifestyle they would like to live, and start saving early to prevent difficult decisions further down the line.
The misconception that a gratuity will be enough to replace retirement provision has left people leaving the UAE in a less than advantageous position. Over the tenure of employment the gratuity is rarely invested which means it’s value is outpaced by inflation and the amount saved is no way near enough to provide a sufficient retirement income. People living in the UAE need to take control of their finances and ensure that when they leave they have benefited from the UAE with more than just memories.
Going back to that Wells Fargo survey: 68 per cent of all respondents affirm that saving for retirement is “harder than I anticipated”. Well unless you want to work well into your 70s, you’d better find a way to make it easier.”
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Updated: February 23, 2015 04:00 AM