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05 March 2024

6th richest in world, but who'll fund retirement?

Survey published by Knight Frank shows emirate is rated 8th most important city for the well-heeled in 2015, ahead of Beijing and Zurich. (File)

By Shuchita Kapur

The zero income tax salary in the UAE means that, in theory, we should be able to save more each month and should be able to work out our retirement plans faster than what we would have been able to do in our home countries.

The UAE’s per capita income at Dh178,351 ($48,597, 2011 estimates by International Monetary Fund), making its residents the sixth-richest in the world, which should help achieve our targets even faster.

Sadly, that isn’t happening. According to a new survey by HSBC, the figures are alarming as a big percentage of residents are way off the mark when it comes to retirement savings and some blissfully are not even on the start line.

HSBC’s The Future of Retirement 2015 report reveals that for nearly 9 in 10 (87 per cent) people in the country, saving for retirement is not a main priority.

As a result of which, more than half (55 per cent) of the working age population feels inadequately prepared for life after work as they did not start saving early enough; the highest proportion globally to express this sentiment.

This year’s research shows that people the world over are facing the prospect of a less comfortable retirement than they might have previously anticipated, with over two-thirds (71 per cent) of pre-retirees in the UAE worrying about having enough money to live day-to-day and 68 per cent fearing that they will run out of money after they stop working.

Additionally, nearly one in 10 working age people (8 per cent) in the country believe that they will never be able to fully retire, says HSBC experts.

Previous reports and survey have time and again underlined the fact that UAE residents are not doing enough to save when their monthly incomes do not come.

An earlier poll by Emirates 24|7 shows just this. The online poll by this website revealed that residents believe they will have to continue work even when they reach the retirement age as their financial situation will not permit them to continue to live their current lifestyle.

Economists believe the main problem today is that people start saving late in their life. The golden rule is to save as early as possible if one wants a comfortable life in his/her old age.

The right age to start saving for retirement is as soon as you enter your career but that rarely happens when gadgets and cars get priority.

The HSBC report highlights that UAE residents are stuck up juggling a number of priorities, leaving only a minimal amount that can be kept aside for retirement.

Paying off debts (34 per cent) and saving for children’s education (28 per cent) are cited as more urgent financial commitments, while only 13 per cent of working age people in the UAE believe saving for retirement is their main priority.

These attitudes are mirrored globally with a majority (85 per cent) stating that preparing for retirement is not their main concern, only adding to the financial mess.