For Indian expats in the UAE, planning for retirement is a matter of family ties

Indian expatriates in the UAE are very likely to put away large sums towards supporting their children’s futures. But this can often come at the expense of proper retirement savings.

Madhu Arora has set up an education fund for her children. Victor Besa for The National

Like any parent, Madhu Arora, who is from Delhi and has been in the UAE for the past two decades, wants the best for her children.

The managing director of Saffron Media Works, a media house in Dubai, along with her husband, Vikram, has set up an education fund for her son, 16, and daughter, 11.

This reflects a trend of Indian expats placing greater emphasis on financially supporting family members, often prioritising their children’s education and helping them in other ways, such as buying them homes and cars.

“We look at our children’s future as the primary objective and provide adequately to cushion them,” says Ms Arora. “As a responsible parent I have made the necessary arrangements to offer my children a springboard through which they could start their life by both giving them a good education and financial stability.”

She explains that she has also set aside sufficient funds for her retirement, having “grown up seeing my parents invest in their retirement from an early age”.

But not all members of the Indian community are so financially prudent.

“The NRI community attributes their success largely to their educational background,” says Abhishake Mathur, the head of investment advisory services at ICICI Securities in Mumbai. “It is but natural that they focus even more on education of their children. Planning for children’s education is among the top financial goals and is related to the Indian value system.”

In some cases, however, NRIs are so focused on providing for their children’s future that they lose sight of planning for their own financial security during their retirement years, he says.

“We have seen that children’s education sometimes take precedence to even retirement planning,” says Mr Mathur.

“Retirement planning seems too far ahead in time and is not always crystallised in one’s thoughts.”

He urges expatriate Indians to dedicate some time to calculating their own eventual cash needs and hiring a financial planner to help map out how to meet their targets and needs.

“Improper financial planning can compound problems especially during retirement,” he says. “We are likely to live longer and spend more on health and would like to be independent. So it’s a good idea to spend some time on how one’s retirement would look like, where would one like to settle, what would be the likely expenses.”

Leena Parwani, the founder of iCare Advisory and chairwoman at LP Insurance Brokers, explains that it is Indian expats’ strong cultural and traditional values that play a large role in their attitudes to personal finance and sharing wealth in the family.

“They are here to make money for the future and give a good lifestyle to their kids and families,” she says.

Her advice is that first and foremost, though, expats should set aside a portion of their salary for their own needs during old age. Those who do not plan for their own future end up being financially dependent on their children, she points out.

“You pay yourself first,” says Ms Parwani. “I definitely advise every person who is working here to set 10 per cent completely aside. That’s important for their own retirement. Here we don’t pay taxes but by paying 10 per cent to ourselves, we can create our own social security programme.”

Kabir Malkani, the head of marketing at Arabian Center and Lamcy Plaza in Dubai, is from Mumbai and has been in the Emirates for 15 years. He has a five-year-old daughter, and says that he regularly saves income for his retirement, despite planning his investment to finance his child’s school and university fees.

“Indians live a life of sacrifice,” he says. “Being prepared for major events of life such as schooling, marriage, medical emergencies, is a must.”

Mr Malkani has made efforts to carefully plan for the worst and organise investments to provide for future expenses.

“I have invested in medical insurance back home in case some health issues require out-of-the-regular or special facilities or treatment. There are firms and organisations that can guide and offer financial advice on structured investment, investment funds, and retirement plans.”

Drawing up a will is also important given his family’s dependence on him financially, he adds.

“This saves a lot of hassles and ensures justice to your family in case of a tragedy. I have signed off all my investments and property to my wife and daughter, in case something happens to me.”

Ninety per cent of people of working age in India expect to provide financial support to at least one other dependant, while half plan to leave an inheritance for their children, figures which are among the highest globally, according to research by HSBC.

“Consequently, it is not surprising to see that nearly 7 out of 10 orking age people in India either never fully expect to retire or only plan to semi-retire,” says Gifford Nakajima, HSBC’s head of wealth development for UAE and Mena.

“We see that this focus on supporting dependants is also an attitude shared by NRIs in the UAE, as a result of which many have difficulties supporting themselves once they stop working.”

Indians are eager for their children to pursue careers such as medicine, engineering, and computer science, according to HSBC.

“Parents here are spending a lot of time paying for the many years of university that their children have to complete to qualify for these careers,” says Mr Nakajima.

HSBC’s research shows that only one in five parents in India expect their children to make a financial contribution to university fees. Also, many parents anticipate help in the form of a cash contribution from other family members, such as the children’s grandparents, which does not materialise in many cases.

“This gap between expectations and reality is similar to what we have seen among NRIs in the UAE, who are keen to support their children throughout university and expect support from their family, but often end up having to cover all the costs if they do not have a sustainable financial plan that then also takes away from other goals such as saving for retirement,” Mr Nakajima explains.

Ms Parwani says it is also important to prepare for all eventualities.

“What could potentially go wrong? We die early or I lose health, which would impact my savings, and I may not be able to take care of my family in the same way I can take care of them today because I have not insured my health properly,” she says.

“The very simple thing they can do is insure your life. That will help you get money and not lose your income if you’re in a situation when you’re not able to work because of your health. If you die, then the insurance will pay out to the family.”

In some cases, Indians even bring their parents and in-laws to the UAE to look after them but the cost of living and medical expenses are high, so this presents its own set of financial challenges, she adds.

HSBC’s Mr Nakajima points out that it is not only Indians in the UAE who are falling short of preparing for a comfortable retirement as they support dependants and fail to put together a sustainable financial plan.

“Working age people here expect their retirement to last 16 years, but their savings to only last 12 years. This in turn can create difficulties for future generations, who then need to support their parents.”

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