Gulf Business recently published their results of the 2017 salary review. Those of use resident in GCC cannot have failed to notice the impact of the ‘low’ oil price on demand for goods and services. Further research suggests that employers are devising other ways of motivating their staff.
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Insurance will never be able to replace those items of greatest sentimental value such as photos and other mementos which we all collect during our lives. It does enable us to trade a possible future event of unknown financial magnitude for a fixed value now, protecting us from financial loss.
The deadline for Dubai Health Authority (DHA) compliant medical insurance is 30th June for all Dubai residents. If you have not got your plan yet you need to act fast. The application process is not complicated but it does take time and we have Ramadan next month which may slow things down a bit. Many employers have provided enhanced plans for their employees and their families whilst others have provided the basic DHA essential benefits plan for employees only,leaving employees to pay for their Dubai resident dependants.
I last wrote about the importance of having a Will in early 2014. Since then there have been a number of important changes in legislation within the Emirate of Dubai.
On 1st May 2015, the Dubai Government provided for a new service for non-Muslim expats living in Dubai. Under the new service, qualifying individuals may register their Will with the Dubai International Financial Centre (DIFC) Wills and Probate Registry. In the event of their death, the DIFC Courts will then have jurisdiction over the dispersal of the assets of the deceased.
For those who do not have a Will registered with DIFC, they will be subject to the old regime in which local courts attempt to match the principals of Shariah with the wishes of the non-Muslim expatriate – a complex, lengthy and expensive process in most cases. Before the introduction of the DIFC option, moveable assets such as cash and cars were often dealt with in accordance with the Will (provided the deceased had one), however immoveable assets (real estate) were usually subject to Shariah law. Under the DIFC Will, real estate is included providing additional certainty that the deceased’s wishes will be followed.
With many young families in Dubai, a further welcome development is the rules on guardianship of minors. Often when speaking to parents, they worry that their wishes for their children may not be carried out at a very traumatic time, and anecdotes which may or may not have been apocryphal do not set their minds at ease. The DIFC option now provides greater certainty for parents should the worst happen to them allowing them to provide detailed instructions to the DIFC court on what they wish to have happen to their children.
I was initially shocked at the cost of registering a Will with DIFC Wills and Probate registry (US$2,800); however, setting aside the burden of worry about young children being fostered in care for extended periods while legal battles are resolved. For those with an average property in Dubai (cost of about AED2.5 million) the Will represents about 0.4% of the value of the assets you are trying to protect, much less than the stamp duty you paid and probably less than the legal fees you or your beneficiaries would pay to resolve any disputes with the distribution of assets after completing the Dubai court ruling.
So, my recommendation of the week is, if you have property in Dubai or young children living with you in Dubai, you should seriously consider obtaining independent legal advice on the merits of registering your Will with DIFC Wills and Probate Registry.
Now the children are all back at school I thought it would be topical to look at school fees planning. There are now more than 500,000 pupils attending fee paying schools in UK. Based on the latest census published by Independent Schools Council which represents over 1,200 schools in UK. There are more than 70,000 boarding, many with their parents abroad.
Why are more people sending their children to a fee paying school and more specifically: what is the attraction of boarding school and what financial costs are involved?
Smaller class sizes and better average results are often cited as reasons for sending children to fee paying schools. However not every jurisdiction in which expatriates live allow children access to free education. Historically, expatriates in the UAE would only stay for a few years. Therefore, if their children lived with them they would want them to continue to study the curriculum of their home country. Consequently, when the posting came to an end the student would not be disadvantaged on return to their home country. In UAE especially, there are a very wide range of different schools available teaching many different curricula. Those longer term expats who have careers that span the globe with a few years in each location often prefer to put their children in boarding school in their home country. This provides an element of stability particularly during senior school when important examinations need to be taken. There is also a school of thought which believes growing up in UAE does not expose children to the ‘real world’ and they may feel they lack cultural roots. The view here being: a few years in their home country in a boarding school can help ‘ground’ children in reality and teach independence.
Whilst significant variations occur throughout the UK, the Independent Schools Council census for 2015 states average day student pays around £12,900 per annum, about AED75,000 at current exchange rates. Those students who are on a full board basis pay an average £30,000 per annum, about AED172,500. Last year fees increased by 3.5% which is the lowest increase in more than 20 years but still significantly ahead of UK inflation over the same period.
Most parents must plan for many years in advance of sending their child to a boarding school. Whilst bursaries do exist it would not be prudent to assume qualification and they rarely cover all costs.
If your son or daughter has just been born and you would like them to attend a fee paying school in UK on a full board basis starting when they are 11 and finishing when they are 18 you should start saving now. Making a judgement about how much to save means estimating rates of investment return, exchange rates, starting capital, inflation, product charges as well as your view on risk and reward, budget and more. All of these things may change over time. At present assuming no starting capital, I estimate you will need to save between £1,100 and £1,600 per month from now until your son or daughter leaves school. Then there are university costs…
Please let me know if you have any questions or comments.
Petrol prices in UAE are due to increase 24% with effect from 1st August. This will make the cost of petrol in UAE amongst the highest in GCC. However it will still be lower than in most countries round the world. Whilst there has been plenty of comment in the local press about the increase and the impact it will have on the cost of filling up the average family saloon, there are wider considerations for the economy.
Demand for fuel is, as economists call it: ‘inelastic.’ This is because we all need it and there are few alternatives we can quickly adopt to take its place. Therefore in the short term prices could increase dramatically and we would still pay. In the longer term people change their buying patterns and seek alternatives to avoid the higher prices.
The world’s economy is based on hydro-carbon fuel. There is virtually no business or industry on earth that does not have some need for fuel. By increasing the cost of this basic commodity the cost of all goods and services will eventually be effected as businesses attempt to pass on their increased production and delivery costs to their customers. The employed customers seek higher wages and a cycle of inflation begins. The UAE economy is linked US fiscal policy as the Dirham is linked to US Dollar. Consequently, the UAE authorities lack some of the traditional financial levers governments use to combat inflation, such as control over interest rates.
The amount by which prices increase will be dependent on the amount of fuel the business and its employees use. In UAE most goods are delivered by truck. At the present time, there is no rail option but we are fortunate that most trucks run on diesel which has not been effected by any price increase.
Additionally, the amount an average expat spends on fuel as a percentage of his or her salary is quite small compared to what they would spend in other countries. Therefore even a 24% increase should not significantly impact their standard of living. But they may opt for a more fuel efficient vehicle when they next change their family car.
Therefore whilst the increase in petrol price is not welcome, I do not believe that it could be used to justify significant price increases elsewhere and should not greatly increase inflation within the economy.
As always, please let me know if you have any thoughts or questions.