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UAE residents failing to prepare for retirement
Study reveals that many are relying on end-of-service gratuity for savings.
December 22, 2013 4:03 by Muhammad Aldalou
There’s a danger that UAE residents may be overly relying on their end-of-service gratuity as one of their main sources of retirement savings, according to new research by Zurich International Life.
The study reiterates what several other surveys revealed this year – the majority of UAE residents are failing to plan for retirement, with a very small percentage actually saving more than enough.
This poll reveals that more than two thirds (67 per cent) of residents in the country are not preparing for retirement, while only 33 per cent has a formal retirement savings plan that excludes end-of-service gratuity.
Jawed Barna, CEO at Zurich International Life Middle East and Africa, says too many UAE residents are either “wrongly assuming” that the end-of-service gratuity or their property assets will provide enough funds to finance their retirement or, worse still, are ignoring the need to safeguard their financial futures.
Barna adds that residents in the UAE should consider prioritising long-term planning over short-term needs in order to secure the retirement they want.
“Many people dream about their retirement and see it as an opportunity to spend more quality time with families, travel around the world and have more spare time to devote to new hobbies and reignite old ones,” he says. “But the dream of retirement can quickly turn into a nightmare, unless you have a formal financial plan or pension in place to fund the end of your working life.”
According to the Zurich survey, even older respondents were not preparing for retirement – 60 per cent of respondents aged more than 40 said that they did not have a retirement plan or pension in place.
“The best financial advice I have ever received was to start saving for my retirement in my 20s. It’s the best way to build up a bigger retirement fund for later in life, as you add more contributions over your lifetime and they have longer to grow,” Barna says, adding that saving even small amounts can help form a healthy savings habit.
This is far from being the first time that UAE residents have been cautioned about their lack of savings scheme (or even culture). In a savings index released by National Bonds last week, 86 per cent of residents claimed that their current savings are insufficient. In fact, the study found that the UAE’s low-income workers were able to save more – between ten per cent and 20 per cent – than all other income categories.
Nearly one year ago, a study by HSBC revealed that residents are “dangerously” unprepared, with 89 per cent unable to describe their current savings as more than adequate for the future.
In September 2012, Mohammed Qasim Al Ali, CEO of National Bonds, said that there was an absence of a savings culture in the UAE, revealing at the time that only one per cent of the study’s participants had saved more than enough for the future.