The introduction of pension freedoms in the UK was a ground-breaking moment and changed how Brits approach long-term saving, especially alongside auto-enrolment.
However, there are mainly negative attitudes for British expats towards retirement planning in the UAE, due to the stories of mis-selling and scandals.
Retirement planning as an expat is difficult – even though clients tend to earn more as an expat due to low levels of tax. But they fail at times to adopt a long-term mindset. The advice sector should be encouraging clients to talk about pensions.
Looking at pension before becoming expat
Before expats leave the UK it is paramount they seek advice about their pension and retirement pots.
When an expat in the UAE takes advice after they leave Britain they may face a lot of pension issues in terms of fund selection, particularly around whether asset allocation is correct. A lot of the work we do is sit down with clients and revisit their investment allocation.
We deal with so many expats who leave the UK and they have done nothing before they move and then they have four or five different pots in the UK, normally not of a huge amount of value.
They need to have a conversation with an adviser in the UK prior to moving to try and get everything in one place.
Lack of long-term planning in Dubai
Pension planning in the UAE is complicated because it is much more difficult to think long-term. One pension benefit when investors are in the UK is they cannot touch it, but in the UAE that is not the case.
If clients want to go and buy a car or a small holiday home, they can access that pension or savings pot tomorrow.
Accessibility forces long-term planning to go out of the window, especially in somewhere like Dubai where there is a "Keeping up with the Joneses" attitude, and the idea of saving for 20 or 30 years in the future becomes more of a struggle.
Due to negative connotations of pensions investors do not consider it as a number one priority and it is more about enjoying the lifestyle of Dubai to do all the nice things that are available, as well as looking after things like rent, which has gone up ridiculously in the UAE.
Speaking to an adviser is key, and understanding what the advantages and disadvantages are of putting money away. It should not be saving what is left, saving should be done at the start of the month.
Building retirement pots as an expat
From an expat perspective in the UAE, some clients can utilise the employment workplace scheme DEWS (DIFC Employee Workplace Savings). Expats will not be allowed to touch that pot until they leave the employer. But this is only for expats with employers in the Dubai International Financial Centre.
UK expats in the UAE should continue to make national insurance contributions to build up their state pension. If they do that for 35 years, they will end up with the full state pension.
