AGBI - Comments in Story on savings & pension

The “golden goodbye” has long been a staple of UAE office life. Expat staff are handed a lump sum by their employer when they leave, based on a percentage of their salary and length of service. But the practice is starting to change. More companies are looking to set up workplace pension and saving plans instead. These arrangements, common in Western countries where they are often required by law, offer a number of advantages, experts told AGBI. Opinion: Dubai expats winning the battle to be taken seriously UAE grey list: UK banks close expat accounts Pensions in demand as expats stay longer in the Gulf When the employee makes contributions from their salary and the employer matches this or provides a percentage, the pot will grow over time and businesses are spared the cashflow headache of forking out a large lump sum. As the money is put to work over a longer period, employees feel secure and valued, which can improve staff retention. Nicholas Maclean, managing director of CBRE Middle East, who has been in the UAE for almost 20 years, described the “golden goodbye” as a wasted opportunity “if money is sitting in a zero-interest scenario. As a matter of principle, we think an employee has the right to do something with their money.” Increased take-up of such schemes also presents a sizeable opportunity for wealth managers, pension funds and other investment businesses in the UAE, Maclean and other business leaders told AGBI. $100bn of savings, pensions and bonuses A report published by Redseer Consulting last month put the potential value of the market at more than $100 billion, across a “diverse range of financial vehicles”. Interest in employee savings is growing as the length of time expats stay in the UAE increases. A decade ago, the average was two to three years; now it’s 9-10 years, according to Redseer. More people are looking to put down roots and save, added Abhishek Rajput, senior consultant and author of the Redseer report. “One of the biggest challenges they face is long-term financial planning,” Rajput said. “Employer-run schemes have been limited to Emirati nationals and the government sector. Most expats have little financial security when they leave a job or retire.” If they save in a bank, sharia compliance means the interest rate on deposits is low compared to other parts of the world. “Expats are looking for new financial engines to help them invest for the future.”