UAE Workforce

Moving to the UAE? This is how UAE expats can start saving for their retirement!

Are you thinking of moving to the United Arab Emirates (UAE)? If so, one important thing to consider is how you will save for your retirement. The UAE currently does not offer a mandatory national pension scheme, which makes it difficult to find the right solution. In this article, we will provide an overview of your options and offer tips on how to start saving for your retirement in the UAE. Whether you are just starting your career or are approaching retirement, it's never too early or late to start planning for your financial future. 

The Most Popular Expat Destination in the World

The United Arab Emirates (UAE) has a large number of emigrants, with nearly 8.9 million living in the country. This makes the UAE the country with the largest percentage of expatriates in the world - in close competition with Qatar and Kuwait. This is due to a variety of factors that make the country an attractive destination for people looking to advance their careers and improve their standard of living.

The UAE has a strong economy and a growing number of job opportunities in various industries, which results in the country becoming a more and more popular destination for people looking for work. Additionally, the UAE is known for its tax-free personal income system, which means that individuals do not have to pay income tax on their earnings. 

Furthermore, the UAE offers a high standard of living with access to world-class education and healthcare, as well as a range of leisure activities and amenities. Combined with the country's warm climate and cultural attractions, the UAE is an appealing destination for people from all over the world.

Emigrants’ challenges in the UAE

Emigrants in the UAE may face a range of challenges, depending on their individual circumstances. Some of the biggest challenges that emigrants in the UAE may face include the following:

- Adapting to a new culture: The UAE is a diverse and vibrant country, with a rich culture and history that may be different from the emigrant's home country. This can take some time to adjust to and may require emigrants to learn new customs and traditions.

- Finding employment: Finding employment in the UAE may be challenging for emigrants, especially if they do not have relevant experience or qualifications. The job market in the UAE is competitive, and emigrants may need to spend time networking and looking for job opportunities to find work. Emigrants can enter the country with a tourist visa, which will grant them 30 to 90 days (depending on the traveling plans and extension requests) to find a sponsoring employer.

- Housing and accommodation: Finding suitable housing and accommodation in the UAE can be difficult and expensive, especially in major cities like Dubai and Abu Dhabi. Emigrants may need to spend time researching different neighborhoods and housing options to find a place to live that meets their needs and budget.

- Lifestyle: When it comes to food, a consumerist lifestyle, entertainment, and hobbies, expatriates often run into difficulties. This is partly due to the high cost of living in the UAE, which is among the most expensive countries in the world.

- Transportation: The UAE does not have a well-developed public transportation system, so locals generally either have their cars or use cabs daily. This adds to the already considerable cost of living.

- Social isolation: Emigrants in the UAE may face challenges in terms of social isolation, especially if they do not have a strong network of friends and family in the country. It can be difficult to make new connections and build a social circle in a new country, and emigrants may need to be proactive in seeking out social opportunities.

- Heat and Weather conditions: The UAE has a hot and dry climate with temperatures regularly reaching over 40 degrees Celsius (104 degrees Fahrenheit) during the summer months. This can be difficult for expats who are not accustomed to such high temperatures, leading to heat exhaustion and other health problems. The constant use of air conditioning also puts a strain on the body.

The current overlook of the pension and retirement opportunities

The UAE is home to a growing population of expatriates, who find it difficult to plan their retirement due to the absence of a national pension scheme. Unlike many other countries, the UAE does not have a mandatory national pension system, meaning that individuals must take responsibility for their retirement savings. This can make it difficult for expats to plan for their retirement and ensure that they have sufficient savings to support themselves in their later years.

The lack of a national pension system in the UAE can be particularly challenging for emigrants from countries with high-quality national pension systems. This is the case for expats from Canada, Israel, and the Netherlands, who may be accustomed to well-developed national pension systems in their home countries. 

Another challenge adding to this is the high cost of living: With high prices for housing, food, and other essential expenses, it is increasingly difficult for expatriates to save for their retirement, as a significant portion of their income may be needed to cover their daily expenses.

What is a retirement savings plan?

In a country, like the United Arab Emirates, where there is no official or mandatory pension scheme, a retirement plan can serve as an alternative way for individuals to save for retirement. Instead of relying on a government-sponsored pension scheme, expats can use a retirement plan to set aside money for retirement and invest it to grow over time.

Retirement plans can come in many different forms, such as employer-sponsored plans, individual retirement accounts (IRAs), or annuities. These plans typically offer tax advantages to encourage individuals to save for retirement and may provide a way for individuals to save for retirement even if there is no official pension scheme in place.

The employer-sponsored retirement plan

An employer-sponsored retirement plan in the United Arab Emirates is a retirement savings benefit offered by an employer to its employees. These plans typically allow employees to contribute a portion of their income to the account and may offer matching contributions from the employer as an incentive for employees to save for retirement.

Solutions, like Aurem, not only automate savings but also offer a better retirement buffer compared to the classic EOSB (end-of-service benefit) that workers usually get in the UAE. This is because the EOSB comes as a lump sum, while the monthly, automatically subsidized retirement fund benefits from the accumulated compound interest over time - creating much more value for the employee overall.

How do employer-sponsored retirement plans benefit employees?

- Convenience: By using a provider like Aurem, employees can participate in a retirement savings plan without having to manage the plan directly. This saves time and effort for employees and makes it easier for them to save for retirement.

- Professional management: Professional retirement plan administration helps to ensure that employees' savings are invested to meet their goals and risk tolerance. This can help employees save more efficiently for retirement and potentially achieve better returns.

- Customization: Aurem offers customizable retirement plans that allow employees to tailor the plan to their specific needs and goals. This can make it easier for employees to save for retirement in a way that fits their individual needs and financial situation.

- Support and guidance: The provider offers support and guidance to employees, to help them understand the retirement plan and make informed decisions about their savings. This can make the plan more accessible and user-friendly for employees and give them the tools and resources they need to effectively save for retirement.

How expats can save for their retirement?

As an expat living in the United Arab Emirates, there are several ways to save money for retirement. Some of the best practices include:

- Start saving early: The earlier you start saving for retirement, the more time your money has to grow.

- Set financial goals: Setting financial goals is an important step in saving for retirement as an expatriate in the UAE. This includes determining how much money you want to save for retirement and creating a plan to achieve those goals.

- To set financial goals, you should consider factors such as your expected retirement age, the type of lifestyle you want to lead in retirement, and any sources of income you will have during retirement. Using this information, you can determine how much money you will need to save to achieve the lifestyle you want in retirement.

- Invest wisely: In addition to saving, invest your money to help it grow. Learn about different investment options, such as stocks, bonds, and mutual funds, and choose ones that match your risk tolerance and financial goals.

- Involve your employer: Even if your basic benefits do not include an employer-sponsored retirement plan, it's worth talking to your employer about this option. Solutions like Aurem ensure that the pension you receive is built up automatically and gradually, depending on your age and risk tolerance.

However, it is important to emphasize that financial well-being is influenced by many other factors, so the individual needs and opportunities of each person will be the most important starting points. The team at Aurem will be happy to help you design a solution that takes into account the complexity of individual considerations as much as possible.

In conclusion, the UAE is an attractive destination if you are looking to advance your career and improve your standard of living. However, the absence of a national pension scheme can make it difficult to plan for retirement. You have only a few options for saving for retirement in the UAE, including opening a savings account (and managing your future retirement fund yourself) or benefiting from an employer-sponsored retirement plan. 

You need to start planning for your retirement as early as possible, to ensure that you have enough savings to support yourself in your later years. By taking the time to research your options and make informed decisions, you can secure your financial future and enjoy a comfortable retirement in the most vivid and dynamically developing regions in the world.