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Expatriates welcome saving fund proposal.

Summary: The new initiative if implemented will provide a reliable post-retirement saving to expatriates

Image Credit: Suchitra Bajpai Chaudhary, Senior Reporter

Dubai: Expatriates have welcomed the idea of savings investment fund to eventually replace gratuity, but with reservations and some thoughtful tweaks to the proposed project.

While the younger expatriate population that has a better capacity and prolonged investment potential thinks this will provide a reliable post-retirement saving, the older expatriate population where employees are closer to retirement see not much merit in such a project as they do not have enough time to reap the returns from such an investment and have already worked out retirement plans calculating their gratuity returns.

Mohammad Nafees, Pakistani expatriate in Dubai, said: "I think this is an excellent investment instrument that will provide good returns to expatriates. The UAE government already has a pension plan in place for its nationals based on the same principle where in the employee makes a three per cent contribution and the government makes a 12 per cent monthly contribution, so a total of 15 per cent investment is made every month for the employee. This fund is invested in shares, bonds and mutual funds and when the employee retires, he gets a handsome return. We have a similar scheme in Pakistan and India. However, for this scheme to work for expatriates, the government will have to ensure that the employers park this investment in a trustee fund. There have been too many instances of companies going bankrupt and employers fleeing overnight leaving expatriate employees high and dry. Once the monthly investment is secured, then this plan can work well."

Rana Arbid, Lebanese national and financial expert, said: "I think this is an attractive and relatively easy and risk-free proposal for expatriate employees to make long-term savings for college tuitions, home purchase, retirement plans and also lower their tax liability in their native countries. Personally if given a choice, I would like to be part of this innovative investment scheme. So far, this proposal is unique for the entire Arab world. The proposal is certain to have pros and cons, but in my opinion it's a positive move. A lot will depend on the salary of the employee and the percentage of the employee contribution. The scheme shows the noble intent of the government to make this a better living place for expatriates."

Pawan Kumar, Indian senior banker, said: "Monthly salary deductions to encourage a habit of saving and support the end-of-service benefits is a great idea, quite like the contributory provident fund that exists in several countries. The flip side is that market-related investments are subject to market risks unlike the end-of-service gratuity which is a fixed benefit. The crux is the proper management of collected funds. The proposed scheme may be made optional for the moment as those who have worked here for 20 years or more might stand to lose if their gratuity is settled now and they are asked to start investing now. They may have already locked their retirement funds elsewhere and maybe banking on the gratuity which is one month's basic pay multiplied by the number of years. This scheme works best for new expatriates coming in post 2017."

Edward Tomaggan, Philippines national, said: "I think this is a very innovative and bold idea and can work very well for young expatriates looking for long-term stay in the UAE. We have a similar scheme in the Philippines and have monthly deductions wherein an employer pitches in with a contribution too. This scheme provides a substantial amount for employees to look forward to when they require as the investment earns compound interest through various saving tools. But here what is a cause for worry is the lack of job guarantee and one wonders what happens in those long periods when an employee may not have a job. Will those gaps mean substantial loss of investment?"

Rupert O' Connor, UK National, Financial Planning Adviser

"This financial investment plan for expatriate employees promoted by the government is certainly a good idea as it will encourage people to save . As a financial planning adviser , I advise people to save from 5-20 per cent of their salary every month. So if an individual can work out where he would like to retire and the sum he will need after retirement, he needs to work backwards on it. Any expatriate may have more than one plan to safely investment money for retirement . Well, he can continue to do that while investing in the expatriate investment plan. This will serve to compliment an Induvidual's diverse retirement investment portfolio . The only thing is the government might need to bring in a law to ensure the employer contribution ."

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Publication:Gulf News (United Arab Emirates)
Geographic Code:7UNIT
Date:Dec 19, 2017
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