A new report has revealed that residents in the UAE are facing a pensions ticking time bomb as they delay saving long term, compared to people in other countries.
The survey from HSBC shows that 46 percent of the country’s residents believe that, despite tax-free salaries, they are being held back by the high cost of living, with a similar number fearing financial hardship in old age. More than 80 percent of the UAE population consists of expats.
Only 29 percent of people felt they were adequately preparing for retirement, with the majority of people beginning to save at the age of 30. This is in contrast to the UK and US, where people start to save in their mid-20s. Indeed, 89 percent of people were unable to describe their current savings as ‘more than adequate’ for the future.
The survey took opinions from 15,000 in 15 countries around the world, with about 1,000 people from the UAE being interviewed.
Among its findings, the report said that on average people in the UAE felt they needed an annual household income of AED126,000 (US$34,303) to be comfortable in retirement.
Other reasons behind the failure to save were given as the lack of pension schemes for non-Emiratis, lack of understanding of savings and investments, and the notion that retirement is too far away to worry about.
The report also showed that people in the UAE are severely impacted by ‘life events’ – a term used to describe moments in a person’s life where a significant amount of money needs to be spent or is no longer available as income. These include the recession and losing a job. In the UAE, common life events are buying a home and paying for children’s educations. Of the people interviewed, two thirds said they are still suffering from the impact of such events.
Rick Crossman, head of retail banking & wealth management, United Arab Emirates, HSBC Bank Middle East Limited, said: “It is natural to prioritise immediate needs and wants above longer term financial health, but these ‘savings gaps’ that occur due to a lack of financial preparation, can equate to serious holes in people’s retirement savings in the long run, once interest and investment growth are taken into account.”
Other figures from the report show that 58 percent of people want to spend more time with friends and family during retirement, while 51 percent wish to start a new business.
Furthermore, 57 percent expect cash savings to be their most important source of income at that stage in their life, with 28 percent admitting to dipping into their retirement savings and 36 percent saying they take from their general savings.
HSBC experts have described the findings as a “time bomb”, which will leave millions of people facing a drastically reduced standard of living in later life, as their savings will last nine years while retirement is expected to last for 15 years.