Don't be an os­trich Pre­par­ing for re­tire­ment P 48

Don't be an os­trich

Middle East Business (English) - - FRONT PAGE -

Re­tire­ment has al­most be­come the-word-that-should-not-be-men­tioned amongst those born in the 1960s and 70s. Al­most as feared as JK Rowl­ing's "Lord Volde­mort" with some age groups, it is a re­al­ity that looms large on the hori­zon.

As I'm en­ter­ing what is deemed to be mid­dle age at 45, I'm not proud to say that I didn't save very much in my twen­ties. My thir­ties were bet­ter as my hus­band and I en­gaged a good ad­vi­sor. When we had the money, we saved as much as pos­si­ble. When we were poorer, we economised and lived well within our means. This has put us in a great place as we head to­wards the lat­ter part of our ca­reers. Both now self­em­ployed, this front-load­ing of our pen­sion pot should help us and our fam­ily in the years to come. Let's take a dif­fer­ent view­point from those who fear the con­cept and start to think pos­i­tively about re­tire­ment as a time for dis­cov­ery and growth. What four things should we in­clude in our re­tire­ment plan­ning that can po­ten­tially ex­tend our life­span? For me it might be reg­u­lar hol­i­days, healthy food, a monthly mas­sage and weekly pi­lates and yoga classes. Sur­pris­ingly enough, my menu for re­tire­ment wouldn't be too far from the sug­gested real so­lu­tion to im­prov­ing longevity1: men­tal fit­ness, emo­tional well­ness, phys­i­cal health and fu­ture plan­ning.

Tack­ling it head on

So, let's start with the fi­nan­cial side of things be­cause no-one can ex­pect to main­tain one's cur­rent life­style with a mas­sively re­duced in­come. We know re­tire­ment must be tack­led head-on, but bury­ing our heads in the sand - like the afore­men­tioned os­trich of the ti­tle - of­ten looks like the more ap­peal­ing op­tion. Se­ri­ous con­sid­er­a­tion of the re­al­i­ties as­so­ci­ated with stop­ping work and not hav­ing a reg­u­lar in­come leaves many feel­ing uneasy. Whilst some see re­tire­ment as free­dom from the daily rou­tines and stresses of the mod­ern world of work, oth­ers view it with noth­ing short of trep­i­da­tion or dread. One is­sue is the height­ened risks of fi­nan­cial in­se­cu­rity in re­tire­ment that arises from poor long-term plan­ning dur­ing a pro­fes­sional's work­ing life­time. This can be twinned with un­re­al­is­tic as­sump­tions about the value of an in­di­vid­ual's sav­ings. Start­ing early and putting more into

sav­ings as you ap­proach re­tire­ment can help, but many find them­selves try­ing to play catch-up for the years when re­tire­ment seemed a very dis­tant prospect. Wak­ing up to re­al­ity in mid­dle-age and see­ing the years re­main­ing un­til re­tire­ment loom­ing big can be a much needed jolt to the sys­tem.

MENA women - dif­fer­ing pen­sion en­ti­tle­ments and at­ti­tudes

A re­cently pub­lished OECD re­port, Women's Labour Rights and En­trepreneur­ship in se­lected MENA coun­tries, sug­gests that

2 the coun­tries in ques­tion across MENA (Egypt, Morocco, Al­ge­ria, Tu­nisia, Libya and Jor­dan) should move to­wards pen­sion par­ity (pub­lic/pri­vate and by gen­der) by en­cour­ag­ing fe­male em­ploy­ees to ex­tend the age at which they re­tire so that they can con­tribute more into their pen­sion pot. The OECD also sug­gests that pub­lic aware­ness cam­paigns take place and as­sis­tance is given to ru­ral women to high­light the im­pli­ca­tions of re­tir­ing early or of not work­ing full­time. Part-time em­ploy­ment or years ab­sent from the work­place are of­ten bi-prod­ucts of rais­ing a fam­ily. This ab­sence from the work­place will of­ten lead to a re­duc­tion in the fam­ily's in­come, fur­ther re­duc­ing the pos­si­bil­ity of sav­ing enough for their fu­ture re­tire­ment.

need to save more

Ac­cord­ing to pro­fes­sional ser­vices firm, Tow­ers Wat­son, in their 2013

3 sur­vey, sav­ings by em­ploy­ees' in the Mid­dle East and North Africa (MENA) are alarm­ingly low, with a quar­ter of sur­vey re­spon­dents sav­ing noth­ing at all, and more than half (55%) putting aside less than 10% of their in­come. Tow­ers Wat­son notes that these find­ings may be a re­flec­tion of the in­clu­sion of Egypt and the Le­vant in the sur­vey. “How­ever, when we look at only the GCC coun­tries we still see this pat­tern,” says the Tow­ers Wat­son anal­y­sis. “Over a fifth do not save any­thing, and al­most half save less than 10% of their earn­ings. This con­tra­dicts the impression that res­i­dents of the GCC save a sig­nif­i­cant pro­por­tion of their in­come and is sur­pris­ing given the pro­longed global eco­nomic un­cer­tainty.” Sav­ings rates are higher among ex­pa­tri­ates in the GCC, ac­cord­ing to the Tow­ers Wat­son data. But its sur­vey still found that al­most one in five (20%) ex­pa­tri­ates save noth­ing at all. Among those in the GCC who do put aside a part of their in­come for re­tire­ment, the amounts saved are mod­est. Ac­cord­ing to the Tow­ers Wat­son sur­vey, 45% of re­spon­dents have sav­ings of less than $5,000, while 13% have be­tween $5,000 and $10,000, and 10% have nesteggs of be­tween $10,000 and $20,000. These pri­vate sav­ings are in­ad­e­quate to cover em­ploy­ees’ ex­pec­ta­tions of their re­tire­ment in­come. In its most re­cent UAE re­tire­ment sur­vey, HSBC found that on av­er­age, pre-re­tirees ex­pect their re­tire­ment sav­ings and in­vest­ments (ex­clud­ing pen­sions) to last for 12 years. “With pre-re­tirees ex­pect­ing to fully re­tire at age 60 and a typ­i­cal life ex­pectancy in the UAE of 76 years, there is a four year ‘gap’ where they will be solely re­liant on any state, em­ployer or per­sonal pen­sion pro­vi­sions they may have,” says the HSBC anal­y­sis. Re­search4 from Old Mu­tual In­ter­na­tional and Quil­ter Che­viot chal­lenges the pre­con­ceived ideas peo­ple may have around re­tire­ment. The sur­vey demon­strates the chang­ing face of re­tire­ment, as the line be­tween work­ing life and re­tire­ment be­comes blurred. Rather than the more tra­di­tional ap­proach to re­tire­ment, where peo­ple work into their 60s and then stop, more peo­ple ex­pect to work part-time, and en­ter re­tire­ment grad­u­ally. A stag­ger­ing 3 out of 4 (76%) peo­ple liv­ing in the re­gion plan to con­tinue work­ing in re­tire­ment, ei­ther part­time or in a dif­fer­ent job, mark­ing a big shift in ex­pec­ta­tions. Many may feel too young to stop work­ing and want to keep go­ing to main­tain in­ter­ac­tion, with 41% say­ing they will con­tinue work­ing for so­cial rea­sons. Oth­ers plan to con­tinue work­ing part-time to make ends meet, with 35% say­ing they will work for fi­nan­cial rea­sons. Just 8% are plan­ning to stop work­ing al­to­gether when they re­tire and 16% are as yet un­de­cided. Mark Leale, Head of Quil­ter Che­viot’s Dubai rep­re­sen­ta­tive of­fice, says: “Re­tire­ment no longer hap­pens on one day, it is a longert­erm tran­si­tion and there­fore the fi­nan­cial plan that peo­ple make for re­tire­ment also needs to adapt. Mak­ing sure you have a fi­nan­cial plan that ex­tends be­yond the time you give up full-time work is more im­por­tant than ever.” Of those who plan to con­tinue to work, an as­tound­ing 77% plan to be self-em­ployed, per­haps show­ing the re­gion has a sig­nif­i­cant num­ber of bud­ding en­trepreneurs. Be­ing self-em­ployed can come with its

own chal­lenges. If peo­ple turn to self-em­ploy­ment as a means to fund their later re­tire­ment, they will need to en­sure they put ad­e­quate fi­nan­cial plans in place. Paul Evans, Head of Re­gion, Mid­dle East & Africa, Old Mu­tual In­ter­na­tional, com­ments: “There is much less cer­tainty on what re­tire­ment looks like now and no two ex­pe­ri­ences will be the same. It is in­ter­est­ing that so many will turn to self-em­ploy­ment, which means the onus will be firmly on the in­di­vid­ual to plan ac­cord­ingly and en­sure they are not ex­posed to fi­nan­cial un­cer­tainty in later life.” The av­er­age amount of time peo­ple in the re­gion ex­pect re­tire­ment to last is 20 years. This is a long time for any fi­nal salary pay­ment (or gra­tu­ity/end-of-ser­vice ben­e­fit/ bonus) to last, which is per­haps why so few peo­ple in the re­gion are re­ly­ing on this in iso­la­tion. In­stead, any money paid by an em­ployer should form part of a per­son’s longterm fi­nan­cial plan, with ad­e­quate per­sonal pro­vi­sions be­ing set aside to fund their long-term fu­ture. Paul adds: “Re­tire­ment in­come is one of the most im­por­tant ar­eas in fi­nan­cial plan­ning as it can have far reach­ing im­pli­ca­tions on some­one’s qual­ity of life when they stop work­ing. A fi­nal pay­ment should be con­sid­ered when look­ing at some­one’s long-term sav­ings plan, but as our re­search shows, it is not be­ing re­lied on in iso­la­tion. “Many fac­tors con­tribute to­wards build­ing a long-term fi­nan­cial plan, and I would urge peo­ple to seek fi­nan­cial ad­vice from a pro­fes­sional to en­sure they have ad­e­quate sav­ings in place to fund their as­pi­ra­tions in later life.” Mark Leale con­cludes: “The need to plan care­fully and en­sure sav­ings last the full length of re­tire­ment is cru­cial. We are see­ing grow­ing de­mand in the re­gion from peo­ple who want to take con­trol of their pen­sion sav­ings; have the funds man­aged by in­vest­ment ex­perts and stay con­nected with the progress to­wards their long-term fi­nan­cial goals.”

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