We all imagine our golden years to be a time when we can finally slow down, enjoy time with our family and only work as much or as little as we want to. However, the stark facts are that many people are not making adequate provision for their retirement.

Pension planning in the UAE tends to go on the back burner when we are young and have other priorities, such as providing for the family and building a career. But it’s never too early to learn to manage money, to start saving and investing wisely.

The truth is we just don’t know whether we’ll be blessed with longevity and outlive our savings. It’s important therefore to decide on the kind of lifestyle we hope to be living when we retire. We need to take into account the cost of living and any subsidies or benefits we may be eligible for, and factor these into our planning. It’s far better to err on the side of caution and overcompensate to ensure we’re adequately prepared.

NRI’s in the UAE have a high need for retirement planning, yet there is a dire lack of basic personal financial planning knowledge. Fortunately, it’s never too late to start investing in your pension planning. We’ve put together some tips to help you on the road to putting your retirement plan in action:

Start with what you have

Get a clear idea on your current net worth, which is your assets minus your liabilities. Assets to include should be liquid, i.e. cash on hand or assets that can readily be converted to cash.

Decide on how much you will save

As a rule, most people will need two-thirds of their working income when they retire. It’s advised to set aside at least 10 to 15 per cent of your income for retirement monthly. For high-income earners wanting to maintain their standards of living, you may need to save up to 30 per cent.

Draw up a budget

Start tracking your monthly income and expenditure – this will give you a clear picture of your spending habits, and where you can divert funds to savings.

Pay off expensive debt

Loans, mortgages, and credit card debt can put a big dent in your retirement dreams, so keep paying these off on a priority.

Resist the urge to upsize your lifestyle

Splurging on spoils can be tempting when your income goes up, but ‘lifestyle-creep’ can set you back on your retirement savings. Save the spoils for special occasions and make sure they don’t outstrip your savings goals. As Warren Buffet says “Don’t save what is left after spending, but spend what is left after saving”.

InsuranceMarket.ae’s Life Insurance & Financial Planning Head, Suresh Chaturvedi answers some critical questions on Pension Planning for NRI’s that can help you plan your better:

Can you recommend some good pension plans that NRIs can consider investing in and what the benefits are? 

NRI’s have multiple options with various insurance based contractual savings plans to choose from – a qualified financial adviser at Insurancemarket.ae will conduct a thorough needs analysis and then recommend the most suitable financial solution. The main benefit is in creating disciplined savings towards retirement goals. A good plan will also allow customers to take advantage of dollar-cost averaging.

Which pension plans should NRIs must absolutely avoid and why? 

Client’s need to be realistic about the return they want on their investments, along with the risks they are willing to take. A double-digit return on investment potential goes along with a certain amount of risk.  There are no wrong or right pension plans. It takes time and discipline to create wealth and you have to stick to your core principles to make it happen.

What are some of the pitfalls and hidden fees that NRIs must be aware of when buying a pension plan? 

One piece of advice I’d give to NRI’s when considering which pension plan to buy is to be realistic about how long you are willing to have a savings plan for. Pension planning as a financial goal is a long term commitment and requires discipline. Start small, for example by saving 5%-10% of your income. Begin with a 3-5 year option and then progress slowly so that you can correct your course if necessary.

Do a majority of NRIs overlook the need to buy pension plans? How is this detrimental? 

In our experience, most of our NRI clients focus on buying Life Insurance and neglect pension planning. While life insurance is the first step to a sound financial plan, the next step is disciplined savings. People do need to realise that keeping all their money in cash or fixed deposit still depreciates the value due to inflation. Hence, clients need to have a savings solution that allows them to invest in the market (with qualified advice) in order to grow their wealth in the long run.

How can we InsuranceMarket.ae help?

Our financial advisers can guide you on the road to successful pension planning in the UAE. With expert industry knowledge of available savings products that can help you achieve your pension planning goals, we can assist with the most suitable savings solutions for your needs.

About Author

Rachel Al Mughairi

About Author

With over 34 years in the international insurance industry in a variety of senior management roles, and as holder of the Diploma in Insurance from the Chartered Insurance Institute, Rachel surely knows her insurance! With experience in London, continental Europe and the Middle East, Rachel is here to share her knowledge and help you understand more about insurance products in this easy-to-understand series of videos and blogs.