Dubai’s Department of Economic Development is studying recommendations by the World Bank to introduce pension plans for expatriates, it has been revealed.
The move comes after the Washington D.C-based international crediting organisation published its findings of an investigation which discovered that the majority of the emirate’s two million foreign nationals send around 40 per cent of their earnings back to their native countries.
And this, of course, means that the emirate’s authorities do not have access to this enormous capital stream for investment purposes.
As a result, the World Bank is urging Dubai to consider creating expat-orientated pension schemes – primarily as this would help reduce the government’s borrowing costs. The emirate’s borrowing costs have become a major concern for global financial institutions since it nearly defaulted when the region’s property bubble burst in 2009. Experts say that such pension schemes would also provide a boost to the United Arab Emirates stock market.
The Bank has proposed three models to Dubai. The first is a “retirement savings account”, the second is a “mobility savings programme” aimed at giving jobless expats funds until they secure work and extensions to their visas; and the third is a revision to the current model which gives employees a lump sum, the amount of which is dependent on their length of service.
South African-born Carlos Knight Albano, who has lived and worked in the emirate for six years, says: “If there were a pension plan available to me here I would think about it very carefully, as I’m sure most long-term expats would. As there isn’t, my investments tend to be overseas.
“A lack of a suitable pension must, surely, be one of the main reasons why foreigners send a lot of their money out of Dubai. Currently, expats aren’t explicitly encouraged by the authorities to keep investments here and so they feel nervous about doing so.”
However, some expatriates contacted by iExpats.com do not share such a view. One foreign business executive, who asked not to be named, comments: “To be frank, like many, I’d not be happy about my money being exposed to the whims of the Dubai authorities. And I wouldn’t want any long-term investments here as expats cannot benefit from permanent residency.”
Nigel Green, the chief executive of the deVere Group, which specialises in expat wealth management solutions, says: “Whether the World Bank’s recommendations are accepted by Dubai or not, expatriates in the UAE, as in most major expatriate destinations, are in many ways fortunate as with the correct financial planning advice, they’re able to use their expat status to their financial advantage.”
Dubai’s Department of Economic Development has not confirmed when, or if, it will implement a new pensions model.