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 Pensions and expats

It is all too easy to put retirement planning to the back of your mind, and when life is so hectic who has got time to think about retirement in 20 or 30 years time.

The reality is that it is best to take action sooner rather than later.  But how much do you need to save? That depends on the following factors:

  • How long you have until you retire

  • How much income you need when you retire

  • How much existing pension provision you have

  • What other non pension assets you have

The short answer to this question is “as much as you can afford”, and the sooner you start the better.

Here’s two examples which demonstrate why you should not delay starting your pension. The examples assume both men want to retire at age 55. They both contribute £350 per month. The figures below show the possible results if the fund grew at 12% p.a, which is not guaranteed and is just used to illustrate the point. The figures below show the value of the £350 at various ages.

Age

Mr Smith starts his pension at age 35

  Age

Mr Jones starts his pension at age 40

         

40

£22,599

40

£0
45 £52,587 45 £22,559

50

£92,718  

50

£52,587

55

£152,280  

55

£92,718

The comparison above shows that Mr Smith started his pension five years earlier, and has paid in £21,000 more than Mr Jones. But Mr Smith's fund, is now worth £51,542 more than Mr Jones'. This demonstrates the effect of "compounding" - getting growth on the growth.

The advantages of an offshore pension:

  • Greater flexibility than onshore pensions

  • No minimum age at which you can take benefits

  • The whole fund can be taken as a lump sum

  • You don’t have to buy an annuity with the proceeds when you retire

  • Offshore pensions benefit from tax-free growth

So your money is not tied up until you’re 50 or 55, you can take the benefits when you want, and in whatever format you want.

Pension investment options

Once you have decided to take out a pension, then you need to decide on the underlying investments. The pension can be invested in low risk to high risk investments, and the choice is yours.

In fact you have the same investment choices and fund options when investing in a pension as you do when looking at any other type of investment. See investments for expats for more details on the underlying assets such as equities (shares), property and fixed interest.

Additionally when deciding on the underlying funds it is important to remember how long your money is to be invested. If you’re normally quite cautious with your investments but have say thirty years until you retire, then you should consider being more adventurous with your fund selection.

If you’re an expat, and want to ensure that you and your loved ones are protected in the event of your death or ill health, and want to discuss your options and get some free quotations without obligation then contact us to speak to an independent financial adviser for expatriates, on +353 874 641 868 or contact us online.  

 

 

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