Two thirds of expats in the United Arab Emirates have failed to make adequate financial plans for their retirement.
Expats who have a steady income when they are working have a blind spot that does not let them see they have to save to maintain that lifestyle when they leave their job, says research by the Noor Bank, Abu Dhabi.
One option is for expats to continue to save into a UK pension, but if they become tax resident in the UAE, they lose the tax benefits of investing in a British onshore pension.
A favoured option for many UAE expats is a Qualifying Recognised Overseas Pension Scheme (QROPS).
Tax free cash
Although no QROPS provider offers a local pension in the UAE or other Gulf States, this is not a problem for resident expats who want to benefit from the lifestyle and no tax environment on retirement.
They can simply transfer their pension into a QROPS once they lose the tax benefits of saving in the UK – and can take those bumped up contributions with them to a QROPS.
Setting up a QROPS in somewhere such as Malta is a popular pension solution for expats.
Malta QROPS come with a 30% tax-free lump sum plus no tax on benefits providing the retirement saver can show they pay all the required taxes in their place of residence.
Tax and financial benefits
Some Malta QROPS come with flexible access along the same lines as available in the UK, which means drawing down 100% of the fund tax-free as no income tax is levied in Dubai or Abu Dhabi.
Malta QROPS are ‘third party’ plans, which means providers have no problem in allowing members to live elsewhere while their pension is based on Malta.
What’s more, foreign exchange problems are limited as Malta QROPS will also pay out in a selection of major currencies.
For expats who live in Dubai but may decide to move on in retirement, a Malta QROPS is also ideal as well. Providers let retirement savers live in any country but the UK. For expats who do move, their pension stays put, saving time and money as no fund transfer to another country is required.