The idea of introducing a scheme to assist and encourage expatriate workers to save while employed in the UAE is not a new one. However in recent months, calls for the introduction of a scheme have become more audible, with the Dubai government being particularly vocal.
At a recent roundtable event organised by research group, Insight Discovery, from which this latest research also comes, Harun Kapetanovic, an economic adviser at the Dubai Department of Economic Development, set out three main targets for the expatriate pension scheme.
One of the key targets was that the scheme should stand alone and not be tied to a government. Kapetanovic also said the scheme should help attract foreign workers and look after the welfare of those working in the UAE.
So far there has been little firm detail on how the scheme would work which makes it hard to judge, according to Sarah Lord, wealth planning director at Killik & Co. in Dubai.
She said: “At the moment there are some good ‘high level’ plans, but more detail is needed before a proper assessment can be made.”
The introduction of a compulsory employee pension scheme would be a significant gear-change for the UAE, which has typically favoured encouraging more immediate incentives such as tax free earnings. However, it is perhaps an indication of the country’s desire to move from an emerging to a developed economy that these plans are being discussed more widely.
“The gratuity payment, made to employees at the end of their service, has been seen, particularly by Western companies and employees, as a substitute for a pension, and it will take some time for employers and employees to change how they view this,” said Lord
She added however, that this has already created opportunities for advisers.
“We have seen more employers approaching us to talk about company pensions as the discussion of this and the media attention it has received etcetera, has brought it to the fore.”
Tim Searle chairman of advisory firm Globaleye, which has its headquarters in Dubai, is similarly pleased the issue of retirement savings is being discussed.
“Conceptually it is a good idea as it raises awareness of the fact people need to take care of themselves in retirement,” said Searle.
“People do not save anywhere near as much they should do – there are enough statistics in the Western hemisphere to support that. So, in an emerging economy, such as the UAE, anything which encourages retirement saving, whether it be a quasi-government backed scheme for the mass consumer or not, is a good thing. However, there is no “one size fits all” financial planning solution.”
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