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Mon 18 Nov 2019 02:00 PM

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Most UAE workers said to be relying on gratuity to fund retirement

Research reveals workers are expecting to receive just $4,600 from their end of service payment

Most UAE workers said to be relying on gratuity to fund retirement

Almost 70 percent of workers in the UAE are relying on gratuity payments to fund their retirement, according to research from Old Mutual International and Quilter Cheviot.

Despite the increased reliance, on average, workers are expecting to receive just $4,600 (AED17,000) from their end-of-service payment, compared to $5,800 (AED21,600) a year ago.

The research reveals the most popular use for the payment is to invest the money into a business (48 percent) followed by investing into the stock market (40 percent).

In the 2018 survey, just 18 percent of people stated they would simply spend part of their gratuity and save the remainder, although for 2019 this increased to 31 percent and is the third most popular choice.

Three quarters of respondents to the survey expect to continue to work in retirement in some capacity either for social (40 percent) or financial (35 percent) reasons and 75 percent believe that they will be doing this work self-employed.

Paul Evans, head of region, Middle East & Africa, Old Mutual International, said: “The global retirement landscape is dramatically shifting from one where someone’s retirement provision is the responsibility of businesses and the government to that of the individual.

“The fact that the average gratuity payment is now a relatively small figure is illustration of this change and it’s worrying that 69 percent of those surveyed are either fully or partly relying on this payment for retirement.”

Earlier this year Dubai International Financial Centre (DIFC) revealed plans to revamp end-of-service benefit payments, allowing employers to pay contributions to an employee workplace savings plan, with workers able to make additional voluntary contributions.

Mark Leale, head of Quilter Cheviot’s Dubai office, added: “With expatriates typically staying in the UAE for much longer during their working careers, proper funding of a pension type arrangement is essential to assist employees with securing their financial future.

“It is encouraging that DIFC are taking positive steps to protect employees’ future benefits, providing a facility for them to make additional voluntary contributions and all within a well-governed environment.”