The UAE has started to become a very attractive place to retire. The country has been improving its infrastructure around inheritance and visas, and now even companies are helping expats prepare to retire in the country.
On 11 October 2022, savings and investment company National Bonds launched a golden pension scheme in the UAE in a move to ramp up its suite of financial planning solutions for nationals and residents.
The scheme, which is targeted towards 89% of the UAE’s population that are expats, will help employees of registered corporates get a head start in retirement.
Employees have the flexibility to contribute as little as AED100 (£23.47, $27.23, €27.14) on a monthly basis and earn a profit on the sum saved, which can be availed in addition to the earned gratuity provided by their organisation. The scheme aims to support companies with their employee retention efforts as well as help them plan ahead for their end-of-service finances.
Clients will also be eligible for life takaful cover provided by local takaful operators.
International Adviser spoke with several financial advice firms in the UAE to discuss how much impact this scheme will have on the expat market.
Game changer?
Sam Instone, director at AES International, said: “Not yet a game changer – although it’s another move in the right direction along with so many changes. The IMF has just forecast 4% growth for next year – world leading and exciting compared with many economies so the outlook is great.”
Sandeep Ghosh, consultant at Holborn Assets, added: “The golden pension scheme has been welcomed as another leap by the UAE towards offering expats a permanent home. While UAE nationals have a robust pension system in place, expats still have to weigh up complex and often fee-laden solutions to plan for retirement.
“Not only will this appeal to those feeling they have little choice but to repatriate at retirement, but also the allure of this scheme will draw in new expats to the UAE who may have earlier hesitated at forfeiting their pensions back home.”
Sean Keheller, chief executive of Mondial Dubai, said: “It is certainly important because it is offering a capital guarantee together with Shariah compliance, with the support of an entity owned by the Dubai government. In isolation, not a game changer, but evidence of further momentum in the direction of travel for workplace savings as a replacement for gratuity liability.
“The word ‘pension’ has been bandied about by the press who seem to be lacking in the knowledge that pensions are normally government controlled, possessing tax benefits, and with other complications which, I believe, the UAE would be keen to avoid.”
Entice expats
The launch of the scheme shows the direction of travel for the UAE wealth and advice market. It could even be the kickstart for more expats to retire in the country.
Chris Ball, managing partner of Hoxton Capital Management, said: “Right now, getting visas and healthcare insurance is the issue with retiring in the UAE.
“The older you get, the more expensive healthcare gets and with visas, the luxury of not having to work comes at a cost of owning your own property or having a golden visa. However, it is becoming more attractive and a real option for many expats who want to continue to live here and benefit from the perks, such as low tax.”
Christopher Davies, financial planner at The Fry Group, added: “The scheme appears to be a savings vehicle that can be used alongside your employers’ end of service gratuity.
“Whilst this additional saving can help meet your retirement expenditure among potential other investments, I do not believe that it provides benefits that would attract the retention of retiring expats in the region.”
More competition
The region has big product providers, but it doesn’t necessarily have an array of firms offering different solutions.
So, do advisers want more firms in the market offering these types of products?
Hoxton’s Ball said: “Better choice of products, in general, is a good thing. So, having more products available in the market is certainly worthwhile. Competition and efficiencies within the market, by having more providers that operate in it.”
The Fry Group’s Davies added: “There are many savings products available to individuals but an expansion of options available is always welcome.
“It would be positive to see more low-fee, transparent solutions available at a low entry point for individuals such as this.”
Looking long-term
The UAE is gradually improving its retirement outlook and is on course to move away from a low-tax jurisdiction to a region that people want to spend their later years in.
But there are still changes that advisers want to see to make sure expats can have a comfortable and attractive retirement.
AES’ Instone said he wants to see chnages in the citizenship programme, ongoing visa developments, the ability to purchase property anywhere and an improving legal system.
Hoxton’s Ball added: “From an adviser’s point of view, more incentives around funds and building those things up is a step in the right direction. Less focus is needed on gratuity, which is essentially dead cash. Instead, we should be helping people get it invested and growing it.
“Similar style to a 401k scheme in the US, defined contribution/workplace pension and auto-enrolment schemes in the UK, it’s important to get these things more inbuilt into people’s packages. This would help with encouraging more people to live here long term.”
