Nearly seven out of every ten people in the United Arab Emirates and the rest of the Gulf Cooperation Council, do not have any form of pension or guaranteed savings that they can rely on when they stop working, according to a new survey by Guardian Wealth Management (GWM).
The survey received more than 2,000 respondents and it found that the Gulf has one of the highest number of residents in the world that don’t have any form of retirement fund with 64.2% admitting they don’t have any pension at all.
In comparison for example, in North America, only a small percentage, 14.49%, are not covered by pensions, while in Europe, the corresponding numbers stand at 44%, GWM said.
Only in Asia, is the figure anywhere near as low as in the Gulf states, with 61% not covered, according to the research. Unlike many other countries, the UAE does not have a pension system in place for expatriates.
Hamzah Shalchi, GWM regional manager in the Middle East, said that the reason for the “worrying lack” of pensions for expatriates in the region could partly be because the demographic of foreign workers is often dominated by young expats.
“As is the case with foreign workers in places such as the United Arab Emirates, many are under the age of 30 and certainly 40, meaning they may not have necessarily started thinking about saving for retirement,” he said.
The GWM survey also found that there was, as Shalchi, points, “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,” he said.
The survey also found that 11.6% of expats who have pensions had moved theirs abroad, compared to 4.35% in North America, 5.88% in Europe and 7.8% in Asia.
QROPS tax fee
However, this figure in the UK, is likely to reduce due to the tax law that has imposed a 25% tansfer fee on Qualifying Recognised Overseas Pension Schemes (QROPs), as reported.
“The announcement of the pension transfer tax in the latest UK Spring Budget has largely killed the QROPs market and this will affect any transfers from March 2017 moving forward,” said Shalchi. “However, there are various options such as Self-Invested Personal Pensions (SIPPs) that may be better suited.”
“The most important thing is to seek professional advice and actually start saving. With life expectancy and inflation going up year-on-year, this should be a priority for savers.”