GCC expats way behind in retirement planning: Survey
dubai — In retirement planning, GCC expats are way behind their counterparts in North America, Europe and Asia, a study by global financial firm Guardian Wealth Management has found.
The annual pension survey found that 64.21 per cent of GCC expats do not have any pension at all compared to 14.49 per cent in North America, 43.85 per cent in Europe and 61.11 per cent in Asia.
Guardian Wealth Management, who have eight offices around the world including Hong Kong, Geneva, London and UAE, surveyed 2,000 respondents online about the type of pensions that they have currently.
Hamzah Shalchi, regional manager in the Middle East for GWM, said last year’s study had found out that most savers are not saving enough for their desired retirement lifestyle. “But the latest study discovered that over half of expats don’t have a retirement fund at all which is truly shocking.”
“I believe GCC expats are quite far behind other expat regions such as Asia and Europe because the high salaries and tax-free incomes make it much easier to spend earnings rather than save them. As with most cases, people come to work here and before they know it, it has been five years and they haven’t saved a penny,” said Shalchi.
Some 24.21 per cent of the respondents said their pensions were based in their home country. This is still far behind expats in North America as the survey found 81.16 per cent of respondents still had an active pension in their home country, while 50.27 per cent of expats in Europe and 31.11 per cent of expats in Asia have home pensions.
“The reason for the worrying lack
People come to work here and before they know it, it has been five years and they haven’t saved a penny Hamzah Shalchi, regional manager in the Middle East for GWM
of pensions back home could partly be because of the demographic of expats in the GCC. As is the case with foreign workers in places such as the UAE, many are under the age of 30 and certainly 40, meaning they may not have necessarily started thinking about saving for retirement,” said Shalchi.
“However as was seen in last year’s survey there is quite a disparity between what people think they need to save for retirement and what they actually need to save for their desired lifestyle. Due to compound interest, it is better to start saving earlier but for less time to allow the pension pot to grow naturally”.
Another option for expats is to transfer their pension offshore. This is one area GCC expats are leading the way with 11.58 per cent saying that they had moved theirs offshore compared to 4.35 per cent in North America, 5.88 per cent in Europe and 7.78 per cent in Asia.
Some of the GCC countries have been working with the World Bank for several years to come up with an efficient pension model that would consider the reality of vast majority (over 80 per cent) of workforce being expats. According to experts, it will probably involve pension schemes where employers and expats will be obliged to contribute.
In the UAE, where end of service gratuity is given to retiring expat employees, some employers are already providing or looking at giving appropriate retirement and savings benefits to expatriate staff. These include the International Pension and Savings Plans (IPPs and ISPs), enhanced End of Service Benefit (ESB) or simply a packaged corporate structure underpinned by a range of investment fund options that employees can choose from.
A report last year by Willis Towers Watson’s International Consulting Group, an advisory, broking and solutions company, revealed that the IPP/ISP vehicle is now being used to deliver pensions and long-term savings to local employee groups in different international locations, such as employees based in their operations in parts of the Middle East.
The research, now in its eighth year and covering 721 plans sponsored by 638 companies, also indicates that companies are using IPPs or ISPs to extend coverage for retirement savings participation to employees in countries where local solutions are unavailable or inadequate.
— issacjohn@khaleejtimes.com