Expats in the UAE, Saudi and Qatar are actively pursuing retirement savings plans, but would consider a pension pot over a one-off gratuity payment, according to new research.
A survey of 1,504 expatriate workers in Qatar, Saudi Arabia and the UAE highlighted the concerns over retirement saving plans.
While 84 per cent of those surveyed cited the benefits offered by their employer as playing a role in their decision to move to the Gulf, there is widespread dissatisfaction with the region’s End of Service Gratuity (EoSG) system.
Expats in UAE, Saudi and Qatar eye pensions
These one-off severance payments, a common practice in the Gulf Cooperation Council (GCC) region, are deemed insufficient for meeting retirement needs by 60 per cent of respondents.
Reforms to increase satisfaction with the EoSG system are vital to maintaining the region’s competitiveness as a work destination, according to the survey, commissioned by global pensions technology platform Smart.
Of the expats polled, 88 per cent said they are actively prioritising retirement savings over other expenses, and 82 per cent said having enough money for retirement is “very important” to them.
A recurring gripe concerned the current system’s perceived lack of transparency. Only one respondent in four felt they understood the gratuity system well before moving to the region.
Many expressed frustration at not having information about “exactly how it works and what percentage of my salary goes to retirement”, in the words of one UAE-based respondent.
Another, from Qatar, added that “it is crucial to have a transparent system that clearly explains how gratuity is calculated.”
The absence of employee contribution options is widely regarded as a significant flaw in the current system.
In Qatar, several respondents called on the government to “make it compulsory for both employer and employee to contribute towards retirement funds.”
The lack of an employee contribution option was also felt in Saudi Arabia, with one expat saying it would be “very helpful” if employees could deduct a small amount from their monthly salary to be added to their end of service gratuities.
Elsewhere, there was evidence that respondents wanted to see a more professionalised and regulated workplace savings and pensions culture in the GCC countries.
More than nine out of ten of the expats polled think governments, employers or both should play a role in implementing and regulating their pensions.
Some 60 per cent wanted to see their retirement savings managed in lower-risk funds, with some age variation in preferences, emphasising the need for choice when it comes to how savings are invested.
Tim Phillips, Managing Director of Smart Middle East and Asia said: “The findings clearly show that the current workplace savings system has significant opportunities for change in order to fully meet the needs of today’s expatriate workforce in the GCC.
“Reform is needed to improve transparency and introduce employee investment options across the region to help workers better plan for retirement. Implementing these reforms will not only secure the financial futures of our workforce but also bolster the GCC’s reputation as one of the world’s leading destinations for global workers and savers.”
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