World Economy

Expatriates in UAE Facing Debts

Expatriates in UAE Facing DebtsExpatriates in UAE Facing Debts

Those lucky enough to receive a company bonus may get excited at the prospect of a bumper pay packet during the ‘bonus season’ in March and April, but the reality is that the majority of people in the United Arab Emirates are using this extra cash to settle debt or pay bills.

According to a survey for Zurich International Life by YouGov, 71% of UAE residents will receive a company bonus during 2015. However for 39% of bonus recipients, the primary use of their payment will be to settle debt with a further 16% using the bonus to pay bills, such as rent or school fees.

Another 13% of respondents said they will leave their bonus in the bank, 11% will invest in property, 10% will invest in a savings scheme, while only 7% will spend the majority of their bonus.

The survey of 1,000 UAE residents also found Arab expats are the most likely to use their bonus to settle debt (45%) or pay bills (19%), with western expats the least likely to settle debt (32%) or pay bills (9%). 

Emiratis are the most likely to spend their bonus (15%), while Indian expats are the most likely to invest it in a savings scheme (16%).

 Strain on Savings

“The tendency to live a lavish lifestyle in the UAE means many residents need their bonus to pay off financial liabilities. This leads to a greater strain on their long-term savings,” said Paul Dawson, Head of Retail Distribution at Zurich International Life.

“Many expats look forward to tax-free bonuses when they move to the UAE with the intention to save and secure their financial future. They probably don’t expect needing to use their bonus to clear debt accumulated during their stay.”

He added: “Another concerning trend is the number of people leaving their bonus in the bank. With UAE inflation running at 4% and low bank deposit interest rates, the net effect of this investment strategy could be a loss in real terms. Try to maximize the returns from your hard-earned bonus.”

YouGov found 44% of expats relocated to earn more money and a tax-free salary; 20% came for career progression; and another 20% for family reasons, in most cases to stay with their spouse. Only 11% relocated to the UAE for its lifestyle and safe environment.

Despite money being a motivating factor for moving to the UAE, Zurich’s survey found only 44% of expats believe they will fulfill their financial goals when they leave the country. In fact, 26% of expats do not set any financial goals for the duration of their stay.