Finance
Other sources of funding for re1rement will typically come from either employment-rela
alterna1vely, individually funded savings plans. Teachers based in the UK would par1cipate in
Teachers’ Pension Scheme, but this no longer applies once you become an expat and for thos
GCC, it is typically replaced by the end-of-service gratuity instead. In the UAE, this is worth 2
every year worked, rising to 30 days pay for every subsequent year, beyond the 5 th year annivers
SECURING AND IMPROVING
YOUR END-OF-SERVICE BENEFITS
BY: PHILIP ROSE
F
For most expats, the gratuity has o;en been seen as a nice “leaving bonus”, but it doesn’t o;en
or
many,
the
prospect
starting to save as soon as possible
For most expats, the gratuity has often
in the context of being a significant contributor towards re1rement planning. For those on short
of
retirement may seem
and the graph below demonstrates
been seen as a nice “leaving bonus”,
sufficiently far off and distant
the differences for a range of scenarios
but it doesn’t often get considered
this is not ul1mately a big disaster, but the longer you stay abroad without any addi1onal plann
that
we don’t need to worry
where the contributed amount is
in the context of being a significant
about it too much today, after all, there
the same, but the time when the
contributor
towards
retirement
the bigger the hole in the re1rement fund becomes. There are also a lot of expats whose 3 year
are plenty of other matters that might
contributions were made varies
planning. For those on short term
seem more
pressing, such as paying
between those that “start early”, take
postings, this is not ultimately a big
turned into 10 years plus (this author included)!
the rent or mortgage, changing the
a “mid-term break” or just “start late”.
disaster, but the longer you stay abroad
car or perhaps where to go on holiday
without any additional planning in
next? Fundamental to the final outcome, is star1ng to save as soon as possible and the graph below
Graph 1A
support, the bigger the hole in the
retirement fund becomes. There are
5 5 “Early investor”
– contributes
AED but the
the
differences
a range
scenarios
where
the
contributed
amount
is the same,
The reality
is that
our future for
financial
also of
a lot
of expats whose
3 year
plan
10,000 pa for the first 10 yrs only
wellbeing and self-sufficiency are
somehow turned into 10 years plus
then stops contributing.
contribu1ons were made varies between those that “start early”, take a “mid-term break” or jus
of
increasing
importance
and
(this author included)!
5 5 “Midterm break” – contributes AED
unfortunately, cost, but they do not
10,000 pa for five years, stops for 10
tend to get as much of our attention
Fundamental to the final outcome, is
Graph 1A
yrs, then resumes for 5 yrs.
as they probably should. Given that
state-provided retirement benefits
and health resources around the world
Graph 1A: THE BENEFIT The benefit of star1ng sooner
OF STARTING SOONER
are already strained by an ageing
population and rising medical costs,
300,000
saving extra towards our retirement
has never been more important.
150,000
For example, the retirement age for a
UK state pension is steadily increasing
and (subject to your date of birth) may
be as high as 68 already, whilst its value
has dropped to the equivalent of AED
3,400 per month. It would also be fair
to presume that over the next couple
of decades, as the demographic
profile ages further, that the pressure
on such benefits will only grow. So, it
wouldn’t be unrealistic to expect to
see the retirement age continuing to
increase, GRAPH 1A
whilst the payments shrink
further.
•
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Early investor
Mid term break
Late investor
“Early investor” – contributes AED 10,000 pa for the first 10 yrs only then stops contribu1ng.
Other sources of funding for
retirement will
come from
• typically
“Midterm break” – contributes AED 10,000 pa for five years, stops for 10 yrs, then resumes for 5 yrs.
either employment-related savings
or, alternatively, individually funded
savings plans. Teachers based in the
UK would participate in the UK based
Teachers’ Pension Scheme, but this no
longer applies once you become an
expat and for those based in the GCC,
it is typically replaced by the end-of-
service gratuity instead. In the UAE,
this is worth 21 days’ pay for every year
worked, rising to 30 days' pay for every
subsequent year, beyond the 5th year
anniversary.
50
Term 1 Sep - Dec 2019
After the Bell