Almost half of UAE residents said that their income is not keeping pace with the rising cost of living in the country, in turn affecting their ability to save for the future, a new survey has found.
According to a report by HSBC, which surveyed more than 1,000 UAE residents, around 23 per cent of working age people said that their ability to save has fallen. This compares to just 13 per cent who said that their ability has risen over the last year.
As a result, the majority of UAE residents are not saving for their retirement and are unprepared for that period of life, the study noted.
About 71 per cent of UAE residents who are nearing retirement worry about having enough money to meet their day-to-day expenses while 68 per cent fear that they will run out of funds once they stop working, the survey said.
Nearly eight per cent of those polled in the UAE also said that they will never be able to fully retire.
Some of the factors that held back UAE residents from preparing for their retirement were paying off their existing debts and saving for their children’s education.
In addition, respondents said that some lingering effects of the economic downturn also affected their plans to save up for retirement.
Around 23 per cent of pre-retirees said that becoming unemployed due to the financial crisis had impacted their ability to save while 18 per cent reported a significant drop in earnings that stopped them from saving for their retirement.
Unforeseeable life events including an illness or an accident were the other factors that impacted retirement saving plans.
“While certain events cannot be anticipated, others that are in fact cited more often by working age people as having an impact on their ability to save for retirement, such as buying a home/paying a mortgage (37 per cent), paying for children’s education (29 per cent), or starting a family (18 per cent), can be planned for more proactively,” said Gifford Nakajima, head of wealth development, UAE and MENA, HSBC Bank Middle East.
“For instance, our research shows us that only one per cent of parents fund their children’s education through specific education plans.
“If people start saving early enough and develop a sustainable financial plan that they can commit to, they will be able to cope with most of the major life events while preparing for retirement, but our research shows that planning for this stage of life is increasingly being postponed.”
The HSBC study follows a slew of other research that has indicated the grave impact that current living costs have on residents and their savings.
Inflation in the UAE reached 3.1 per cent in the first 11 months of 2014 with housing and utilities accounting for the largest share of the rise.
However, the rate of inflation in the Emirates dropped by 0.1 per cent month-on-month in November.