Looking to the future

One of the many problems that the fall in stock markets has caused over the last few years is that the fall in individuals' assets may have well put back their retirement plans for a number of years, as they have watched their capital fall.

I have mentioned in a previous article that many companies around the world have fallen well behind in the funding of their employees' pension schemes. This has now been realised by the UK government, for instance, who intend instigating an enquiry into the state of many pension schemes.

However, what about people in this region, where apart from international companies, few companies actually have pension schemes for their employees. One of the reasons for this is that most of us are here for a relatively short period in terms of our working lives.

Thus, it is really important that we start our own schemes. Needless to say, no one ever complained of having too much money in their old age so the more you save now the better it should be later.

On the other hand, we are also here to enjoy ourselves, so it is always difficult striking a balance between spending and saving.

What I advise as a minimum is that people should save, as a minimum, the amount that they would pay in tax on their income if they were living in their home country. After all they would have to give it to the government if they were not here.

Gratuity funding

The other slightly worrying thing for me is that companies here are liable to pay their expatriate employees a gratuity when they leave, and yet from a recent survey I have made, few companies make provision for this. Most feel comfortable meeting any liabilities out of cash flow, which is fine unless something untoward happens and then, I am afraid, that the employees will be the ones to suffer most.

Many of you will remember a gentleman by the name of Robert Maxwell who decided that he would do this with the pension fund of his employees, 'borrowing' money for investment in various business projects and to block holes in his accounts.

Unfortunately, when this was discovered it was found that there was no money available to pay pensioners both present and future. This has led to a long drawn out court case, which, to the best of my knowledge, is still proceeding.

Companies here are obliged to set monies aside for nationals but no provision is made for expatriates. Equally, elsewhere companies are forced to place the monies into a 'trust' with separate pension trustees to ensure that the money is being managed correctly. No such legislation is operative here. However, with the setting up of the recently announced DIFC, I am sure that this will be an area that is looked at.

Can you help

In the meantime, my company is trying to set up a working group of selected employers to find out how we can make it easier and more profitable for employers large and small in the region to set up a fund to ensure that monies will be available to meet expatriate staff gratuities.

If anyone feels that they have views that would be helpful in this respect then I would be happy to hear from them, but please remember we must work within existing legal regulations, as we cannot expect the authorities to bring in compliance rules overnight.

In the meantime everyone should consider setting up some sort of savings scheme so that when you leave here, you will be able to remember the good time that you had here while sipping a beverage in a nice restaurant rather than sitting in front of the television with no heating or means of support in your old age.

Sorry to be so morbid this week, hopefully normal service will be resumed in future articles, but as you may be able to tell it is something that I feel strongly about.

The author is director of marketing with Towry Law International, Dubai.