Middle East investors ‘need at least $5m to retire comfortably’

Unsplash/Clem Onojeghuo

• Gulf savers want to build a bigger nest egg than most, survey finds
• Average global figure for poll respondents is $3m to $5m
• Over 20% of those in Middle East say they need $20m-plus

Most Middle East investors believe they need at least $5 million for a comfortable retirement, according to a survey.

The latest MLIV Pulse survey, carried out by Bloomberg and published on Tuesday, asked more than 500 traders how big a nest egg ought to be.

The global average was between $3 million and $5 million, but this was not enough for the majority of investors in the Middle East. A third of respondents in the region said more than $5 million was required to enjoy retirement while another 22.2 percent thought the minimum was $20 million.

Rupert Connor, partner at Dubai-based Abacus Financial Consultants, described the global average as “quite high” but added: “The figures from the Middle East, upon reflection, do not surprise me due to the net worth of many individuals who reside here.”

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The sum of $3 million was enough for 31.4 percent of those in North America, 29.4 percent in Asia and 42.9 percent in Europe, while $5 million was the magic number for 42.6 percent in the US and Canada, 35.3 percent in Asia and 23.6 percent in Europe.

None of the respondents in the Gulf thought they could get by on less than $1 million.

In a separate survey carried out at the start of the year, professionals in the Middle East and North Africa said saving for the future was their top new year’s resolution.

Almost two thirds (63 percent) of the 2,988 respondents said building a nest egg was their priority, in the poll for jobs site Bayt.

Keren Bobker, a Dubai-based independent financial adviser and senior partner at Holborn Assets, welcomed the news, telling AGBI that a large proportion of the UAE population had “nowhere near enough in terms of savings and investments”.

She added: “It may be that the recent inflationary increase in the cost of living has brought home to some people that they will need far more money, whether as cash, investments or property, than they previously thought.

“With expected long life expectancies these days, people need more in the way of assets than they might think if they want a comfortable future in later years.

“The end-of-service gratuity is no substitute for a traditional pension and even with upcoming work-related savings options in the UAE, it is essential that expats make arrangements to support themselves.”

Connor pointed out that the amount needed for retirement depends heavily on lifestyle choices.

“At 4 percent per annum withdrawals, a pension pot of $1.625 million will generate a monthly income of AED20,000 [about $5,450] and this will satisfy a typical 20 to 30-year retirement,” he said.

“However, it remains to be seen whether an AED20,000-per-month income would suffice, due to those living lavish lifestyles where luxury and travel is the norm.”

With expats now opting to stay in the Gulf longer than the global average, there has been an increase in demand for pension services in the UAE and Saudi Arabia.

“We have observed an increase in interest and discussion in the Middle East around offering pension type savings for expatriate employees,” said Robert Ansari, head of investment and retirement for India, the Middle East, Turkey and Africa at Mercer, a professional services firm in New York.

Most private sector employers do not offer pension savings plans, preferring to depend on the end-of-service gratuity scheme, as mandated by UAE law, but this is changing.

“We have also noted increased interest for information on pension savings from employers in the kingdom of Saudi Arabia and other countries in the Middle East,” Ansari said.