Top Retirement Plans in UAE

With the UAE’s growing cost of living and inflation, having a retirement plan that offers inflation-beating returns is crucial. By planning early, however, you can accumulate enough savings to enjoy a stress-free retirement and protect your loved ones from financial burdens in the future.

What is Retirement Planning?

Retirement planning is a strategy for long-term savings, investing, and, eventually, withdrawing the funds you accumulated so that you can lead a financially comfortable retirement. 

A retirement plan in the UAE generally considers your liabilities, future expenses, and life expectancy to estimate the amount you should invest and the returns you would receive during your retirement years.

Why is it Important to Plan for Retirement?

One major thing a retirement plan combats is the inflation rate, which highly influences living expenses over time. 

Here are some more reasons why retirement planning in Dubai, UAE is important –

• Retire Early: Early retirement planning lets you retire sooner. This gives you the flexibility to stop working before the typical pension age.
• Longer Life Expectancy: Reducing financial stress through proper planning can help you live longer by lowering stress in your later years.
• Cover Medical Expenses: As medical needs rise with age, a solid pension plan ensures you can afford the care you may need.
• Achieve Retirement Goals: A retirement plan provides the financial freedom to travel, start a business, or enjoy hobbies without financial worries.
• Maintain Your Lifestyle: Retirement planning helps you maintain your current lifestyle, even if your pension income is lower than your salary.
• Leave Savings for Family: Many retirement plans include life insurance. It ensures your family is cared for if something happens to you.
• Financial Independence: Early planning ensures you won’t need to rely on others financially in your old age.
• Diversify Income: A retirement plan offers multiple income sources, helping you meet various financial goals.
• Account for Inflation: Planning for retirement helps protect against inflation's impact on your future financial needs.
• Reduce Stress: Having a secure pension plan reduces the daily stress of managing finances, especially when balancing family and housing expenses.

Benefits of Retirement Plans in UAE With a retirement plan in hand, you can lead a stress-free life at present and in the future. Most retirement plans are designed to withstand market inflations and enable you to enjoy your life post-retirement.  A few benefits of retirement plans are discussed below –  Assured Returns – When you buy a retirement plan in the UAE, you receive assured income benefits right from the start of the distribution phase. It means that you don’t have to stress yourself about any delays in maintaining a regular stream of income post-retirement.  Family Remains Financially Secure – This is another benefit of the best retirement plan in UAE. In case of the life assured’s untimely demise, a death benefit is applicable under the retirement policy and it is paid to the beneficiary.  Flexible Premium Payment Modes – You have the flexibility to pay premium as a lump sum or regularly – yearly, monthly, half-yearly, or quarterly.  Creates a Stream of Income – With a retirement plan in place, once you retire, you can easily keep up with your lifestyle with a steady income stream. You can receive the pension payment as a lump sum or monthly income.  Option to Customise Retirement Plan – As a policyholder, you have the power to enhance the policy with rider benefits. It is important to note that you would need to pay an additional premium over the base policy premium.

What are the Features of Retirement Plans in UAE?

Mentioned below are the major features of a retirement investment plan —

• Steady Income – A pension plan provides a reliable income after retirement. In a Deferred Plan, you receive payments after retiring. In an Immediate Plan, meanwhile, you get payments as soon as you start paying premiums.
• Vesting Age – This is when you start receiving monthly pension payouts, usually between 40 and 70 years. You can select your preferred start age.
• Surrender Value – This is the amount you get if you end the plan early, minus fees. It's better not to surrender the plan to avoid losing benefits.
• Accumulation Period – This is the time during which you build up your retirement savings by paying premiums either monthly or in one lump sum.
• Payment Period – After retirement, your payout period is how long you receive the pension. This tenure usually lasts for 20 years — from ages 60 to 80.

How Does a Retirement Plan Work in UAE?

Retirement plans in UAE are savings and investment tools that provide a steady income after retirement. You pay premiums over a set period, which are invested in funds or assets of your choice. 

Understanding how a pension plan works is key to making the right investment.

There are two main stages – accumulation and vesting. 

• In the accumulation stage, premiums are invested. 
• Once the plan matures (vesting stage), you start receiving a pension. 
• You can either receive regular payouts or withdraw a lump sum to invest in an annuity plan.

Note – Pension plans offer guaranteed maturity and death benefits, providing financial security for both you and your family.

How Much Should You Save for Retirement?

As a general rule, aim to save at least 15-20% of your income for retirement. Moreover, to estimate how much you’ll need, consider all future expenses and income sources. 

Here are some key points to help your planning —

• Assess Retirement Expenses – Some expenses will stop (like commuting), but others may arise (like healthcare). List these changes to estimate your future needs.
• Consider Income Sources – Factor in income from pensions, EPF, or other funds in your planning. These additional sources can supplement your retirement savings.
• Maintain Lifestyle – Ensure your retirement savings can support the lifestyle you currently enjoy.
• Account for Inflation – Remember that future costs will rise. Plan your savings accordingly and diversify with options annuity plans and mutual funds for better security.

When Should You Start Investing in a Retirement Plan in the UAE?

You should start investing in a retirement plan in UAE as early as possible. 

Early Career (20s and 30s)

• Focus on Financial Independence – Start working towards Financial Independence & Early Retirement (FIRE) by saving and investing early. It’s like planting a tree today for future shade.
• Build an Investing Habit – Set aside a portion of your income for investments to grow your wealth steadily.
• Leverage Compounding – The earlier you start, the more your investments can grow through compound interest over time.

Mid-Career (40s and 50s)

• Increase Savings – With higher income, focus on boosting your retirement savings.
• Maintain Balance – Ensure retirement savings don’t overshadow other financial goals or lifestyle needs.

Close to Retirement

Fine-tune Your Portfolio – Protect the investments you’ve built and adjust your financial strategy for a secure and comfortable retirement. 

Who Should Invest in the Best Options for a Retirement Plan in UAE?

Anyone can invest in the best retirement plan in the UAE. 

This includes –

• In Your 20s: Single, No Dependents — Starting early helps you save more for retirement. Even though it may feel too soon, investing now can help you build a large retirement fund. At this age, a market-linked pension or deferred annuity plan can be ideal as you can take on more risk.
• In Your 30s: Single, Married, or With Dependents — In your 30s, securing your financial future is crucial. A retirement plan can cover your retirement expenses, whether you're single or have dependents. Choose a retirement plan that fits your needs and supports your current lifestyle.
• In Your 40s: With Dependents or Financial Obligations — Many people in their 40s start thinking about retirement, often while managing big expenses. A guaranteed benefit or conservative pension plan with low-risk investments is recommended at this stage.
• In Your 50s or Older: Retirement or Legacy Building — At this stage, you’ve likely met your major financial goals. A pension plan can help you build a financial legacy for your family. 

Consider an immediate annuity for instant payouts or a deferred annuity if you’re still working. Look for plans offering death benefits to secure your family’s future.

How Do You Select the Best Retirement Plan in UAE?

Selecting the best retirement plan in the UAE is a simple 5-step process —

When do you want to retire?

The first step in retirement planning is finding out the age of retirement. This helps establish how long there is to save and how long the retirement fund will need to last.

Where do you want to retire?

Choosing where to retire shapes the lifestyle and cost considerations. For example, living in a major city like Dubai, Mumbai, or London will come with higher living costs and inflation. Living in smaller towns or on the outskirts may lower expenses, but access to affordable, quality healthcare must also be factored in.

What income will be needed during retirement?

Once the retirement location and timing are set, it becomes easier to estimate monthly expenses during retirement. While exact figures are hard to predict, these factors can help make a reasonable estimate of future needs.

What is the impact of inflation?

Inflation steadily reduces the purchasing power of income and savings. Factoring inflation into retirement planning ensures that the retirement corpus lasts a lifetime and possibly leaves a legacy.

How much will be needed for retirement?

Using advanced retirement planning tools, it's possible to calculate the ideal retirement corpus. This calculation considers inflation, expected returns, and life expectancy, ensuring financial security and potential legacy planning.

Factors to Keep in Mind When Buying a Retirement Plan in UAE

When buying a retirement plan in the UAE, take note of the following factors —

• Cover all post-retirement expenses — Your pension should be enough to handle all expenses once your regular income stops. This includes daily needs, travel, your child's education, weddings, and more.
• Provide returns that beat inflation — With inflation increasing the cost of goods and services over time, your pension plan should offer returns that outpace inflation to maintain your standard of living.
• Offer lifelong income — Since regular income stops after retirement, your pension plan should provide lifetime payments, ensuring you can cover your expenses throughout retirement.
• Cover medical emergencies — Choose a retirement plan in UAE that includes financial protection for medical emergencies, critical illnesses, or disabilities. This can provide crucial peace of mind in case of unexpected health issues

Frequently Asked Questions