Four in five expats not saving enough for retirement

UAE residents face ‘grim realities’ of paying down debt instead of saving, say experts
Four in five expats not saving enough for retirement
In excess of 80% of expats are not saving enough for their retirement, experts say
By Ed Attwood
Wed 20 Jul 2011 07:45 AM

Despite widespread assumptions of the UAE as a tax-free
savings haven, more than four in five expatriates are not saving enough for the
future, financial advisers have warned.

“In our experience, from the
hundreds of first meetings we have with UAE residents every week, we estimate
that in excess of 80 percent are currently not saving enough for their retirement,
whether they have something in place or not,” PIC regional director Spencer
Lodge told Arabian Business.

“The reliance on a property
portfolio, which was identified as a popular retirement plan in [a
recent] report, is a common, but too risky strategy adopted by many
expatriates in the UAE."

According to another advisor,
savings levels among expatriates are “very low” and in line with the percentage
of insurance penetration in the region. In-house research from life companies
indicates that this penetration is not more than 11 percent.

“Many are faced with the grim realities of
paying down unsecured debt [credit cards] from those halcyon days of easy
credit and now the boom time is somewhat abated, then folk are being cautious
with what cash they have,” said Tim Searle, chairman of Dubai-based financial
planning firm Globaleye. 

“The
challenge now is historically low interest rates, market/employment confidence
and the failure of leaving cash on deposit being rarely recognised as accepting
negative returns in real terms.”

Searle added that clients’ demands
were evolving due to the advent of technology and collective investment power,
with many wanting online access to monitor the performance of their portfolios.

But Lodge
added that there was some hope for the future, especially due to lower rents
and a stabilisation of the property market, which he said meant that many
residents had more money in their hands.

“UAE residents are benefiting from
the feel good factor returning to the country,” he said. “They are
obviously aware of all the problems of debt ridden Europe and whilst taxes are
likely to rise in the Euro zone, this is not the case in the Middle East and
with the UAE being seen as the most stable nation in the Middle East confidence
is beginning to soar.

In June, a survey by National Bonds said that nine out of
ten residents in the UAE were worried about not saving enough, with 46 percent
of the population saving less than they had initially planned.

Nearly three quarters of respondents (71 percent) admitted
that they do not save regularly, with just under a tenth saying they did not
save at all. Of the latter figure, most blamed higher expenses and loans for
their inability to save.

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