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The changing face of retirement in the UAE

October 2017

October 2, 2017 | 11:40 | Dubai

New research* from Old Mutual International and Quilter Cheviot challenges the preconceived ideas people may have around retirement.

The survey demonstrates the changing face of retirement, as the line between working life and retirement becomes blurred. Rather than the more traditional approach to retirement, where people work into their 60’s and then stop, more people expect to work part-time, and enter retirement gradually.

A staggering 3 out of 4 (76%) people living in the UAE plan to continue working in retirement, either part-time or in a different job, marking a big shift in expectations. Many may feel too young to stop working and want to keep going to maintain interaction, with 41% saying they will continue working for social reasons.

Others plan to continue working part-time to make ends meet, with 35% saying they will work for financial reasons. Just 8% are planning to stop working altogether when they retire and 16% are as yet undecided.

Mark Leale, Head of Quilter Cheviot’s Dubai representative office, says: “Retirement no longer happens on one day, it is a longer term transition and therefore the financial plan that people make for retirement also needs to adapt. Making sure you have a financial plan that extends beyond the time you give up full time work is more important than ever.”

Of those who plan to continue to work, an astounding 77% plan to be self-employed, perhaps showing the region has a significant number of budding entrepreneurs.  Being self-employed can come with its own challenges. If people turn to self-employment as a means to fund their later retirement, they will need to ensure they put adequate financial plans in place.

Paul Evans, Head of Region, Middle East & Africa, Old Mutual International, comments: “There is much less certainty on what retirement looks like now and no two experiences will be the same. It is interesting that so many will turn to self-employment, which means the onus will be firmly on the individual to plan accordingly and ensure they are not exposed to financial uncertainty in later life.”

The research also shows how the gratuity scheme in the UAE can contribute towards providing a fund for retirement.

77% of people in the UAE expect to receive an end of service gratuity. A small proportion, 13%, are not sure if they will receive a gratuity, perhaps due to some uncertainty around the terms of the scheme.

For many expats in the region, the decision over whether they receive a gratuity might depend on whether they leave their employer before they leave the country. If they leave their employer they should qualify for a gratuity, but if they transfer to another country with the same employer then they may not qualify.

The amount of money that people expect to get from their gratuity varies greatly. Whilst 24% expect their gratuity to be over US$20,000, 68% of people expect their gratuity to be below US$20,000 with an average payment of US$11,500.

There are mixed messages in the UAE regarding whether a gratuity is a replacement for a person’s individual pension savings. The research shows that only 12% of people are completely relying on the gratuity to fund their retirement, with 51% relying on the gratuity payment ‘a little’ and 34% are not relying on it at all.

The average amount of time people in the region expect retirement to last is 20 years. This is a long time for any gratuity to last, which is perhaps why so few people in the region are relying on the gratuity in isolation. Instead, the gratuity should form part of a person’s long-term financial plan, with adequate personal provisions being set aside to fund their long-term future.

Paul adds: “Retirement income is one of the most important areas in financial planning as it can have far reaching implications on someone’s quality of life when they stop working. A gratuity should be considered when looking at someone’s long-term savings plan, but as our research shows, it is not being relied on in isolation.

“Many factors contribute towards building a long-term financial plan, and I would urge people to seek financial advice from a professional to ensure they have adequate savings in place to fund their aspirations in later life.”

Mark concludes: “The need to plan carefully and ensure savings last the full length of retirement is crucial. We are seeing growing demand in the region from people who want to take control of their pension savings; have the funds managed by investment experts and stay connected with the progress towards their long-term financial goals.”

*Old Mutual International and Quilter Cheviot investment and retirement research, August 2017. A targeted piece of research, aimed specifically at investors living in the UAE (mainly Dubai and Abu Dhabi) who use the services of a professional to invest in the stock market. Investors needed to have a minimum of US$50,000 invested. 130 responses were received in total and were a representative cross section of those living in the UAE (expats, NRIs and GCC Nationals).

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