Less than 20% of workers in UAE save for retirement
MANY PRIORITISE THEIR IMMEDIATE FINANCIAL SITUATION OVER FUTURE PLANNING
More than 80 per cent of the UAE’s working population do not have a systematic retirement plan, according to recent study by HSBC.
According to the study, less than one-fifth (18 per cent) of people in the UAE are paying into a retirement account every month and only one-quarter (24 per cent) are saving anything for retirement.
HSBC’s Future of Retirement: Bridging the Gap study finds that 62 per cent of working age people in the UAE aspire for a comfortable retirement, but the shocking find is that 76 per cent do not put anything aside regularly for their later life.
Lack of adequate savings combined with rising life expectancy is likely to make retired life difficult for many who live in the country. According to the World Health Organisation’s (WHO) data, global average life expectancy has increased by 5.5 years between 2000 and 2016, to 72 years (74.2 years for females and 69.8 years for males), the fastest increase since the 1960s.
This lack of saving is likely linked to poor knowledge of how much money is needed in retirement, as well as many prioritising their immediate financial situation over planning for their older years.
“According to the survey, it is clear that for many, the reality of the here and now is taking precedence over preparing for life after work. Two in five (43 per cent) agree it’s better to spend money on enjoying life now than saving for retirement, and more than half (53 per cent) are typically saving for short-term goals rather than longer term plans,” said Marwan Hadi, head of Retail Banking and Wealth Management, UAE, HSBC
While almost two-fifths are concerned about the affordability of residential care in retirement, only 7 per cent are putting aside anything specifically for future costs of nursing and home care.
Four in five (83 per cent) anticipate their children will support them at some point in their retirement, placing UAE residents right at the top globally with that expectation, followed by Indonesia (76 per cent), Mexico (75 per cent) and India (68 per cent).
“Getting older brings uncertainty for many, but most people feel hopeful about their retirement. They look forward to spending time with friends and family, pursuing hobbies and getting fit. However, evidence from current retirees suggests that only 20 per cent are actually receiving any financial support from their children,” said Hadi.
Lack of adequate savings combined with rising life expectancy is likely to make retired life difficult for many who live in the country.
Two-stage old age
A two-stage retirement is becoming increasingly common as life expectancies rise, the study finds. An initial retirement period, usually involving relative good health, often lasts a decade or more and is generally followed by a shorter, less active time.
In the UAE, most people expect to pay for the first active stage of retirement themselves. Three-fourth (75 per cent) anticipate funding retirement through a pension scheme, and around 60 per cent through personal pension schemes. To maintain standards of living in later retirement, 28 per cent would start a business and 23 per cent would consider going back to work.
“We know lifestyle demands and day-to-day commitments can make it hard to save for tomorrow. But recognising the costs of ageing, and making plans for them sooner rather than later is the first step towards a rewarding older life. So make a promise to yourself today to start saving for your older years,” said Hadi.