Long-term Financial Planning when Relocating to the UAE

Working in the United Arab Emirate’s dynamic and growing health sector while earning a tax-free salary enables doctors to save and invest for their future.While your mind may be on more immediate concerns, it is important to think ahead and plan for retirement and make stable Long-term Financial Planning when Relocating to the UAE.

At Allocation Assist, many doctors have asked what to do about their pensions when they relocate to the UAE.

Why a retirement plan?

Planning is required to enjoy a comfortable life after you stop working as well as provide for your family. Dubai and the wider UAE offer expats a great lifestyle. However, it can be tempting to overspend, and budgeting is required. There are many ways to set aside savings for retirement, and, as an expat, you have a wider range of options to consider.

Are there employee pension schemes in the UAE?

There are currently no employer pension schemes for expatriate employees in the UAE. For Emirati nationals only, there is a government pension scheme with employee and employer contributions. However, all employees who have completed at least one year are entitled to an end of service benefit, or gratuity, when they retire or move to another company.

What is the End of Service Gratuity?

At the end of service, employees receive a lump sum depending on how long they have worked for the same company. It is calculated according to the basic salary, not including allowances and incentives. The gratuity calculation is different for expatriates working in the government and private sectors.

Those working in the government sector receive one month’s basic salary for each year of service for the first five years of service, one and a half month’s basic salary for each of the next five years of service, and two months’ basic salary for each year of service thereafter (calculated on the basis of the last five year’s average basic salary).

Private sector employees receive 21 days’ salary for the first five years of service and 30 days’ salary for each year of work following the first five years. Days of absence from work without pay are not included in the calculation of the period of service.

How can I invest my end-of-service benefits while still in employment?

Employees of Dubai Government entities, including those working in government-sector hospitals, who have completed one year of service are automatically enrolled in the DIFC Employee Workplace Savings (DEWS) scheme. This is a savings and investment scheme, managed by Zurich, that invests end-of-service benefits (paid by the employer) on behalf of employees, who can then choose their preferred investment plan. The benefits, and returns accrued, are not paid out until the end of service. In addition, employees can make voluntary contributions through salary deductions whilst in employment to build their personal savings, if they wish.

For private sector employees, there is an optional, voluntary scheme, which works in a similar way, overseen by the Ministry of Human Resources and Emiratisation in coordination with the Securities and Commodities Authority.

What should I do about my existing pension?

Many doctors have an employee pension scheme from their home country, such as the NHS Pension in the UK. Pension schemes are a tax-efficient way to save for retirement in your home country. We recommend taking financial advice and considering your long-term plans before deciding what to do with an existing pension.

If you plan to return to work in your home country, keeping the pension with the option to buy added years (to make up for gaps in contributions) may be the best option. Government-backed schemes, such as the NHS pension, offer a guaranteed pension payout which may not be offered by private pensions, or self-invested personal pensions (SIPPs).

If you are planning to stay in the UAE for the long term, you can consider transferring your pension. For UK pensions, you can transfer into a Qualifying Recognised Overseas Pension

Scheme (QROPS) without losing the benefit of tax relief on contributions. As there is no income tax in the UAE, there is also no tax to pay on pension benefits.

What are my retirement planning options?

For expatriate doctors, financial planning for retirement can consist of several different options. Spreading your retirement portfolio across a few different investments can help reduce your risk and maximise returns.

In addition to a pension scheme, you can consider the following options:

A fixed deposit savings account, if ring-fenced specifically for retirement, can give you a guaranteed rate of interest on your savings with low risk.
An investment portfolio offers the possibility of higher returns, but the valuation may go up or down, depending on the market. Your bank’s wealth management team may be able to help you with your investment portfolio, according to your personal goals.
Investing in property can provide rental income in retirement while potentially also growing in value.

If you are a doctor relocating to the UAE, you should plan for retirement as early as

possible. It is necessary to weigh up all the options, as these may differ from your home country.

References:

Retirement Financial Planning in UAE: 7 Tips to Plan Your Retirement | Life and Money

What Is A Pension? | How Do Pensions Work? – HSBC UAE

https://www.citibank.ae/life-and-money/article/retirement-planning-uae.html

https://www.hsbc.ae/retirement/pensions-in-the-uae

Pension Options in Dubai | UAE | Money Saving Expat

https://moneysavingexpat.com/money/pensions-and-retirement

Pension schemes for Expatriate Workers in private and Government Sectors | The Official

Portal of the UAE Government

https://u.ae/en/information-and-services/moving-to-the-uae/expatriates-working-in-the-uae/p

Long-term Financial Planning when Relocating to the UAE