Rising living costs squeezing consumers’ budgets in the UAE
Rising costs of living are squeezing the monthly budgets of pre-retirees and forcing them to dip into their savings pots just to continue repaying their debts, a new research reveals.
People approaching retirement, aged over 55, are spending 8 to 11 per cent more on their weekly food shopping and public transport fares and other travel costs, limiting their ability to clear their borrowings, according to a recent report by insurer Aviva.
Over 55-mortgage holders (19 per cent) and private tenants (8 per cent) have also felt the impact of rising housing costs. The survey, conducted in the UK, tracks the concerns and finances across three ages of retirement: pre-retirees (aged 55 to 64), retiring (65 to 74) and long-term retired (over 75). More than 16,000 consumers were included in the survey between February 2010 and May 2013.
Financial experts warned that a huge proportion of expatriates in the UAE will face the same problem when they reach 55, given that many residents lack financial planning. A growing body of research suggests that UAE expats are not confident they will have enough money to maintain their lifestyle when they get older.
“Unfortunately, I think there is a high likelihood that expats in the UAE will have the same problem as the UK’s pre-retirees. Even though many people earn a lot more here than they do in their home countries, and also have the benefit of not paying tax, the UAE can be an expensive place to live, as rents are rising again, as are school fees and medical costs,” said James Thomas, regional director at Acuma Independent Financial Advice.
“There is also the temptation to fall into the high life and spend a lot of money enjoying life to the full. This is fine, but it should not be to the detriment of your financial wellbeing.”
Expatriates are well advised not to use their savings to meet debt repayments to ensure their finances are stable by the time they approach retirement. To ensure their savings keep up with inflation, Thomas said people’s savings need to be managed and their attitudes to risk assessed. They should also consider what options are available, build a portfolio of investments that they are comfortable with, and review regularly.
“So as not to erode their savings, it is important that over-55s view all of the assets available to them holistically, including their housing wealth, to improve their financial freedom,” added Clive Bolton, managing director of Aviva’s At Retirement business.
Falling savings, investment returns
While people approaching retirement are struggling to clear their debts, those in older age groups are facing falling savings and investment returns.
According to Aviva’s report, the income of the typical 65 to 74-year-old has fallen by Â£18 (Dh100) a month or Â£216 a year, while the over-75s are typically surviving on Â£109 less each month.
The number of over-55s relying on investments and savings as a source of income has likewise dropped from 30 per cent in May 2010 to 24 per cent this year.