Michael Brough is the director at Towers Watson, a global professional services company, which released its sixth annual report on international pension plans (IPPs) at the end of last year. The report surveyed 438 IPPs sponsored by 406 companies. The Chicago-based consultant talks about the growing importance of such funds for employers who have staff in the Middle East and Arabian Gulf region.
Who has access to a savings plan like this here in the Middle East?
Around 49 per cent of the plans surveyed were for expatriates. These vehicles can be used for many different purposes. A lot of multinational companies have one they will use for global expats and Gulf nationals in the Middle East, but the same vehicle can be used for expats in Singapore, countries in Africa as well as global nomads who go from country to country. That said, quite a number of the plans are designed for the Middle East only.
Can the local population also access these plans?
They are meant for local national, local expats and global nomads. It is common to have a plan that covers all the countries in the Gulf, and Jordan and Egypt. Employees are able to move about within the company and stay in the same pension plan. And it is mainly for all employee groups. There is a small proportion of plans for executives only – around 10 per cent – and employers make a higher contribution to this.
The report mentioned that six of the 15 new plans in 2013 were set up for local Middle-Eastern based workforces. Why is there an increased focus on this region?
Things got quieter last year. In 2012, there were 14 plans designed for the Middle East. Perhaps reflecting where we are in the cycle of the global downturn, there is quite a lot of activity now. There is more interest in introducing these vehicles often for the purposes of retention and attraction of employees.
What are the most popular attraction or retention methods?
Cash is the main priority, so maximising the base pay, and allowances and bonuses. When it comes to benefits, medical is always popular; making sure everybody in the family is covered and all areas of health care are featuring there, such as dental, vision, etc. Risk benefits tend not to be valued as you only receive them when somebody dies or is disabled. Then you have pension and savings, and even though this is a young demographic and people stay for short periods, the interest is driven by a couple of factors. The local market is quite weakly regulated and if individuals want to set up a saving plan, it is expensive. There are high commissions, and therefore less money is invested for members’ benefits. With the IPPs, these are established with institutional structures, they are low cost, and the value of the fund is much enhanced as the charges are much lower.
What do you forecast for this year?
The results for the Middle East will be higher. From the dialogue we are having with clients, there is a lot more activity here. There was a clear issue in attraction and retention of employees along with improvements in medical plans, holiday and savings plans so that employees value their job more.
You have a second survey on end of service benefits. How did the Middle East fare in this study?
The Middle East report on end of service benefits surveyed 174 organisations, and 29 per cent of them have an international saving plans (ISP). Of those, 140 are based here in the Gulf. And 30 per cent of the multinationals in that survey have a savings plan, either an IPP or an ISP, which are the same vehicle but with different objectives. An IPP tends to be a long-term savings plan with a retirement objective, but you can access the savings early. An ISP has a savings objective but can be used for retirement planning. And both allow the payments to be made at any age. If someone joins a company at 30 and leaves at 35, they don’t have to wait until 65 to get the benefits, they can get it straight away.
ssahoo@thenational.ae
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Killing of Qassem Suleimani
SHOW COURTS ORDER OF PLAY
Wimbledon order of play on Tuesday, July 11
All times UAE ( 4 GMT)
Centre Court
Adrian Mannarino v Novak Djokovic (2)
Venus Williams (10) v Jelena Ostapenko (13)
Johanna Konta (6) v Simona Halep (2)
Court 1
Garbine Muguruza (14) v
Svetlana Kuznetsova (7)
Magdalena Rybarikova v Coco Vandeweghe (24)
Killing of Qassem Suleimani
If you go
The flights Etihad (www.etihad.com) and Spice Jet (www.spicejet.com) fly direct from Abu Dhabi and Dubai to Pune respectively from Dh1,000 return including taxes. Pune airport is 90 minutes away by road.
The hotels A stay at Atmantan Wellness Resort (www.atmantan.com) costs from Rs24,000 (Dh1,235) per night, including taxes, consultations, meals and a treatment package.
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Winner: Ashjaan, Fabrice Veron, Eric Lemartinel.
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Winner: Manhunter, Ryan Curatolo, Mujeeb Rahman.
Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
Round 3: February 7-9, Dubai Autodrome – Dubai
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
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How to come clean about financial infidelity
- Be honest and transparent: It is always better to own up than be found out. Tell your partner everything they want to know. Show remorse. Inform them of the extent of the situation so they know what they are dealing with.
- Work on yourself: Be honest with yourself and your partner and figure out why you did it. Don’t be ashamed to ask for professional help.
- Give it time: Like any breach of trust, it requires time to rebuild. So be consistent, communicate often and be patient with your partner and yourself.
- Discuss your financial situation regularly: Ensure your spouse is involved in financial matters and decisions. Your ability to consistently follow through with what you say you are going to do when it comes to money can make all the difference in your partner’s willingness to trust you again.
- Work on a plan to resolve the problem together: If there is a lot of debt, for example, create a budget and financial plan together and ensure your partner is fully informed, involved and supported.
Carol Glynn, founder of Conscious Finance Coaching
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Hydrogen: Market potential
Hydrogen has an estimated $11 trillion market potential, according to Bank of America Securities and is expected to generate $2.5tn in direct revenues and $11tn of indirect infrastructure by 2050 as its production increases six-fold.
"We believe we are reaching the point of harnessing the element that comprises 90 per cent of the universe, effectively and economically,” the bank said in a recent report.
Falling costs of renewable energy and electrolysers used in green hydrogen production is one of the main catalysts for the increasingly bullish sentiment over the element.
The cost of electrolysers used in green hydrogen production has halved over the last five years and will fall to 60 to 90 per cent by the end of the decade, acceding to Haim Israel, equity strategist at Merrill Lynch. A global focus on decarbonisation and sustainability is also a big driver in its development.
Cryopreservation: A timeline
- Keyhole surgery under general anaesthetic
- Ovarian tissue surgically removed
- Tissue processed in a high-tech facility
- Tissue re-implanted at a time of the patient’s choosing
- Full hormone production regained within 4-6 months
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
UAE currency: the story behind the money in your pockets
The Great Derangement: Climate Change and the Unthinkable
Amitav Ghosh, University of Chicago Press
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Director: Laxman Utekar
Cast: Vicky Kaushal, Akshaye Khanna, Diana Penty, Vineet Kumar Singh, Rashmika Mandanna
Rating: 1/5
The Case For Trump
By Victor Davis Hanson