Planning for the future

As David Core from UAE-based Fund Advisors reports, the annual National Bonds GCC Savings Index has found that 65 percent of residents surveyed – local and expat – don’t save any money on a regular basis.

Of those that do, 45 percent save ten percent or less of their income.

“Most (working individuals) have two days in their weekend, when they do most of their spending,” adds Greg Pogonowski, senior financial planner, LiME Financial Planning. “Most retirees have seven – yet less money.”

Flexible choices

So what are the options for UAE residents? First, says Stephen Wright, senior associate with the Holborn Group, a pension in the conventional sense doesn’t apply within the UAE context.

“Pensions in most taxed countries are a way to encourage people to save through tax rebates,” he explains. “As there’s no tax in the Emirates it mitigates that need. What we do have are long-term savings plans which act as ‘international’ pensions.

“These in fact are more flexible. Most (conventional) pensions have rules and regulations on how you can take an amount of any lump sum or income. With international pensions, you can take all benefits at a predetermined age.”

There is also the option to transfer pensions based overseas into an international plan – but stay informed, says Core: “If you’ve already built previous pension plans prior to moving to the UAE, take advice on whether they’re best left as they are or channelled through an overseas arrangement.

“Transferring offshore can include benefits such as funds being payable to beneficiaries on death (often nil with occupational schemes), higher amounts taken as a lump sum, exposure to less tax and greater control of your investment strategy.”

Employee strategies

As Wright comments, “Many people confuse their company gratuity scheme with a pension. It is not, and doesn’t provide the potential for long-term income provision.”

There may be ways however to use your situation to your advantage. While employer pension contributions are rare in the UAE, why not ask your company to pay into your pension plan instead of getting a pay rise, suggests Pogonowski.

A way of contributing lump sum investments towards a retirement fund might be through any bonuses you may receive, says Core. Still, he concedes, “People don’t plan to fail but commonly fail to plan.”

Choosing a pension

• Not all pensions are the same, so be sure exactly what performance to expect from your cash.

• Be fully aware of the charges involved. Even small differences can make a huge difference to your final pension.

• Seek advice from a qualified independent financial adviser that doesn’t act on behalf of any particular pension provider and can therefore provide impartial advice.

• Regularly check how your fund is performing and don’t be afraid to move elsewhere.

 

 

Mark Atkinson