Gulf expatriates failing to save for retirement

Region's 'spend culture’ eating into nest eggs needed for the future, warns analyst

Expats are failing to save tax-free earnings for their retirement funds

Expats are failing to save tax-free earnings for their retirement funds

Gulf expatriates are failing to save enough for their future, thanks to the region’s “spend culture” and a lack of financial education, the CEO of research firm Insight Discovery said.

A dearth of independent financial information means migrants fail to take advantage of their tax-free earnings to save a nest egg for retirement, Nigel Sillitoe told Arabian Business.

“There is too much of a spend culture among a lot of expats,” he said. “There should be more education over here about why it’s so essential to save for your retirement. The worst thing you can do is spend a lot of time in the Middle East – five or ten years – and not save a nest egg when you are in a tax-free environment.”

International financial services firms are ramping up their investment in the Gulf in a bid to capture a growing share of the region’s wealth. Individual investors in the GCC hold around $1-1.2 trillion investable liquid assets with the UAE and Saudi Arabia sharing up to 80 percent of total assets, according to consultants Booz & Co. 

The number of international and local asset managers and life companies in the Middle East will continue to grow over the next twelve months, with particular focus on the GCC countries, said a report commissioned by Dubai-based Insight Discovery, published last week.

“The expansion of the regional economies will imply larger pools of investable cash and, more crucially, greater numbers of expatriates who need the products and services of asset management companies and international,” noted the report.

At least one global life company and one international asset management company will set up operations either in Qatar, Saudi Arabia or the UAE, within the next year, it said.  

The report, which sampled 225 executives from investment firms in the Middle East, said the bulk of clients in the Middle East prefer to invest their savings outside of the region.

“Only a small minority of the clients and their advisers have any interest in investing for the long term in the MENA region,” said the report.

Hedge funds and private equity are the least popular asset classes for regional investors, it added.

Just over half of those polled said they believed investment in Islamic funds would increase. “54.4 percent told us that they expect demand for Sharia-compliant investment products to increase over the next 12 months or so.

“It is probably not coincidental that this number is about the same as the number of advisors who come from India, Pakistan and GCC/MENA countries,” the report noted.

Dubai’s National Bonds Corp last week warned GCC states are facing a “national crisis” over the lack of savings culture among citizens. Research from Islamic savings scheme showed 84 of nationals fear they have not set aside enough money to secure their future.

“The consistency in the lack of awareness about the importance of savings and the lack of their being a financial plan is epidemic across the GCC countries. That’s where the gigantic task is ahead of it,” said CEO Mohammed Qasim Al Ali.

“People have a short-term view about their financial health because they are locked into a certain living standard.”

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