By Staff writer
Despite tax-free salary, a large number of expats in the UAE fail to fulfil financial targets before they leave - survey
Less than half of expats who move to the UAE earn more money and a tax-free salary expect to fulfil their financial goals by the time they leave, according to a new survey.
A survey of 1,000 expats conducted by YouGov on behalf of Zurich International Life revealed that only 44 percent of expats manage to achieve their financial targets during their time in the UAE
The poll also showed that the majority of those lucky enough to receive a company bonus will use this extra cash to settle debt or pay bills.
According to a survey, 71 percent of UAE residents will receive a company bonus during 2015. However for 39 percent of bonus recipients, the primary use of their payment will be to settle debt with a further 16 percent using the bonus to pay bills, such as rent or school fees.
Another 13 percent of respondents said they will leave their bonus in the bank, 11 percent will invest in property, 10 percent will invest in a savings scheme, while only 7 percent will spend the majority of their bonus.
The survey of UAE residents also found Arab expats are the most likely to use their bonus to settle debt (45 percent) or pay bills (19 percent), with Western expats the least likely to settle debt (32 percent) or pay bills (9 percent).
Emiratis are the most likely to spend their bonus (15 percent), while Indian expats are the most likely to invest it in a savings scheme (16 percent).
The survey also showed that the majority of company bonuses (81 percent) equated to one month's salary or less; while a lucky 7 percent received a bonus worth three times or more their monthly salary.
For 45 percent of respondents, the bonus in 2015 is higher than the payment in 2014.
"The tendency to live a lavish lifestyle in the UAE means many residents need their bonus to pay off financial liabilities. This leads to a greater strain on their long-term savings," said Paul Dawson, head of Retail Distribution at Zurich International Life.
"Many expats look forward to tax-free bonuses when they move to the UAE with the intention to save and secure their financial future. They probably don't expect needing to use their bonus to clear debt accumulated during their stay."
He added: "Another concerning trend is the number of people leaving their bonus in the bank. With UAE inflation running at 4 percent and low bank deposit interest rates, the net effect of this investment strategy could be a loss in real terms. Try to maximize the returns from your hard-earned bonus."
Zurich's survey also asked expat respondents for the main reason they moved to the UAE. It found 44 percent of expats relocated to earn more money and a tax-free salary; 20 percent came for career progression; and another 20 percent for family reasons, in most cases to stay with their spouse. Only 11 percent relocated to the UAE for its lifestyle and safe environment.
Despite money being a motivating factor for moving to the UAE, the survey found only 44 percent of expats believe they will fulfil their financial goals when they leave the country. In fact, 26% of expats do not set any financial goals for the duration of their stay.
"The majority of expats move to the UAE for better earning potential through increased salary, tax free income and career progression opportunities," said Dawson.
"This represents a great opportunity to increase your savings and build a nest egg to secure your financial future when you return to your home country. Sadly, many expats are missing this opportunity by not setting or realizing their financial goals and return home with little more than a good sun tan."