Are workers ready for retirement?

Saudi nationals feel good about their finances today, but some doubt they are ready for retirement. A survey by asset manager BlackRock found that 82% of Saudi nationals are positive about their current financial wellbeing, but only 59% felt prepared for retirement, according to the Read on Retirement report (pdf). The figure fell to 41% among Saudi expats, the lowest of any group surveyed.

The gap between intent and action is wide. Three-quarters of respondents say they have begun preparing for retirement, yet only 24% are contributing to a pension or savings plan. Most hold cash (49%) and gold (40%) instead — liquid, but no defence against outliving their savings.

Current cost-of-living pressures are eroding retirement savings for Saudi and UAE workers. Some 42% of respondents worry about lacking short-term savings for unexpected expenses, while 41% face high housing and rental costs, and 35% cannot afford to put money aside for future investments.

REMEMBER- The amended Social Ins. Law, in effect since last July, raised the retirement age to 65 and cut the old-age pension accrual rate for new entrants from 2.5% to 2.25% of average wage per year. BlackRock estimates replacement rates dropping from some 70% to 45%.

Structure = confidence: Saudi nationals with a workplace scheme were 20 points more likely to feel prepared than those without (78% vs 58%); for expats the gap was 43 points (82% vs 39%). Appetite for a defined-contribution scheme is near-universal — 95% of Saudi nationals and 84% of Saudi expats — yet just 6% expect to rely on one.

SOUND SMART- A defined-contribution scheme channels regular, invested contributions — in BlackRock's model, a matched 8% from employer and employee — into the worker's own portable account. That is the structural break from the End of Service Benefit, an employer-funded lump sum that sits uninvested and doesn't travel between jobs.