Dubai is a fabulous desert playground for expats tempted to spend their tax-free salaries on a playboy lifestyle rather than save for retirement.
Spending rather than saving is a trap many expats lay for themselves.
Rather than think about tomorrow, the shopping malls, entertainment and outdoor, sporty lifestyle can suck away money.
Although expats earn enviable tax-free salaries, the average expat pension income of £33,000 a year, including the state pension, does not stretch too far.
A fair share of the cash goes towards expensive private health care, housing and air fares for visits to the UK.
Even a modest £25,000 a year pension – the amount left to fund after stripping away the state pension payments – needs a pension pot of around £700,000 to generate the return.
Putting that in perspective, a 30-year-old expat on an average Dubai salary of £4,500 a month needs to save £1,000 a month to reach that target, assuming growth of 5% and basic rate contribution relief.
Of course, only expats who remain British resident can claim contribution relief. Expats who are tax resident in Dubai would need to increase their monthly savings to £1,200 a month to stay on track.
That’s where choice and temptation come in.
An expat family may have school fees, accommodation and health care looked after by an employer, but that pension is still 25% of annual income and needs maintaining in and out of assignment for at least 25 years.
That’s a big financial commitment, and with so many calls on the cash and retirement a long way off, it’s easy to put off saving until another day – only time flies and that date along way into the future soon comes.
Don’t become a grizzled expat who runs the money they have spent on enjoying life only to find they must pull in their belts and survive retirement on much less than they expected.
Look for professional financial advice and suffer a little spending pain while you are earning to gain some respite when you are older.
After all, pensions are not complicated – saving is just putting aside some money now to defer spending until sometime in the future, much like the reverse of borrowing, where someone is lent money to spend now against future earnings.