A worrying majority of expats in the UAE has made no plans for retirement, according to a survey by Mercer.
In its Financial Security and Savings in the UAE report, the consulting firm found that the only plan 89% of expats in the region have made is to “work as long as possible”, beyond the state retirement age.
While the retirement age for Emiratis is 49, it rises to 60 for non-local workers.
Expats can continue to work up to the age of 65, however, after obtaining approval from the minister of Human Resources and Emiratisations or the undersecretary.
“A significant number of those interviewed for this report do not appear to have developed plans for supporting themselves and their families once they stop work, nor do they appear to have sufficient savings in place to assure their financial security,” said John Benfield, head of wealth & investments India, Middle East, Africa and Turkey at Mercer.
A great area of concern, however, is how few (24%) have access to a work-based pension, as many senior decision-makers in the region believe employees are better off making their own financial decisions.
They also blamed pension plan complexity as the reason for employee non-participation, Mercer found.
Diverging views
But most employers (96%) agreed that it is important to offer enhanced benefits to their members of staff; including savings, investments, financial advice and support.
More than eight in 10 employees (81%) believe they would be less likely to leave an organisation if it offered such incentives, as they see benefit packages as a potential recruitment and talent retention tool.
But this sentiment was not fully supported by decision-makers, since only 62% agreed that offering these types of plans would help with staff staying with the firm.
The lack of incentives is causing employees to struggle with their money, as those surveyed ranked the “use of emergency lenders at high interest rates as the second most important cause of financial stress”, Mercer discovered.
“When it comes to longer-term financial planning, UAE senior decision-makers seem to be less aware of the reasons that employees might neglect to put aside savings for the future,” the consulting firm said.
Not many options
According to the report, most employers in the region simply do not offer work-based pension plans; and only 24% of employees have access to one.
This is pushing workers to rely on external financial advisers, or even savings and investment tracking tools, rather than count on their employer’s help.
As a result, many decision-makers and employees – 44% and 45%, respectively – have admitted to doing little if anything when it comes to planning for their retirement.
Mercer discovered that there is a “clear gap” when it comes to accessing pension plans between the two groups.
Emirati nationals are more likely to have government-sourced schemes; unlike their expat counterparts.
Nearly half of employees (43%) admitted they are relying on their end of service benefit to meet their post-retirement financial needs.
A similar percentage said they are confident that the sum will cover long-term savings after they stop working, and the potential costs associated with moving back to their country of origin.
Room for improvement
When employees were asked about the status of their relationship with decision-makers, nearly all (99%) claimed that improvements in or additions to the benefits offered would have a positive impact, and 70% claimed they would feel more satisfied with their job.
This ‘distance’ between employees and senior decision-makers can also be seen in the “trust gap” identified by Mercer.
Employees cited their partner or spouse, the UAE government and their families as more financially trustworthy than their bosses, in that order.
“This finding indicates that employer-sponsored pension benefits and/or access to financial planning education and advice would help longer-term expats, in particular, [and] employees feel better cared for,” Mercer said.
“This would clearly help to increase trust between employers and employees.
“Employees’ perception that employers do not care about their financial well-being poses a risk of losing valuable talent that organisations need to be aware of.
“Employers would be wise to consider incorporating improved savings and investment benefits offered to employees,” the consulting firm added.
The Financial Security and Savings in the UAE report surveyed 50 senior decision-makers and 517 full-time employees in the UAE between October and November 2019, all of whom had a minimum monthly household income of AED8,000 (£1,678, $2,177, €2,005).
