UK Pensions

UK pensions

Do you know where your pension is? Do you know where it is invested? Do you Know the current value/performance? Do you know the deficit of the pension scheme you belong to? Do you know how much, if any, will be left to your loved ones? Is your pension a DC scheme or a DB scheme?

QROPS

Offshore financial products and services can help you achieve financial security and provide you with the quality of life you require as an expatriate.

SIPP

An increasing number of professionals of all nationalities have been moving and working abroad in the last decade.

QNUPS

Pension schemes and effective retirement planning are essential for those who choose to relocate or retire abroad as financial independence is of paramount importance.

If you are unsure of any important information regarding your pensions, I can help you locate the pension and find out all the information you need to make an informative decision for the best solution for you.

Over 16 million people in the UK have never reviewed their pension plan, meaning that they either have no idea that they have one, or have lost track of it.

Whilst this kind of oversight won’t affect them in their day-to-day lives, it will nevertheless catch up with them when they approach their twilight years. It will be too late to do anything about it if the first time you review your pension is when you’re in retirement. 

If it won’t bring in the income you expected you will, unfortunately, have just two options:

  1. Work Longer
  2. Accept a lower income for the rest of your life

By keeping an eye on your pension, you will be able to make sure that it is still on course to achieving your financial target. It is important to review your pension at least once a year, as circumstances and markets constantly change.

Effect of Inflation

Imagine you are supplying the sand to build a man-made beach. On day one you lay 100 tonnes of sand on the shore line, the next day you come back and realise that the sea has eroded 50 tonnes away. So today you lay another 100 tonnes, again the next day you come back and again the sea has eroded another 50 tonnes away. So even though you laid a total of 200 tonnes of sand, you are only left with 100 tonnes. This is what inflation can do to your pension! 

So getting back to finance, you invest in a fund that is growing at 2%, you’re feeling rather good about yourself as you believe that your funds are growing at a fantastic 2% per year right? Wrong! If inflation currently stands at 2.75% you will be seeing a real term growth of – 0.75% meaning that your pension fund is actually diminishing in value instead of increasing.

Inflation is a trend of increasing prices from one year to the next. It is important to know the rate of inflation as it represents the rate at which the real value of your pension is being eroded. Inflation therefore guides savers to know exactly how much of a return their investments need to make for them to maintain their standard of living. 

With this idea in mind, investors should try to invest in products with returns that are at least equal to or greater than inflation.

Prepare to live longer

With the average person now facing a retirement age of 77, it has never been more important to begin planning your pension fund as soon as possible.

As mentioned earlier, some retirees are, unfortunately, forced to work longer due to inefficient pension planning. Governments are failing to provide for the retired as healthcare and retirement provision have become more and more costly over the years.

It is vital to establish a strategy for your retirement as soon as possible. To maintain the standard of living you have become accustomed to, you will need to have a solid plan in place that is both realistic and efficient.

Consolidate your pension

Imagine you kept your wallet on your bedside table, your mobile phone downstairs on the fridge, your car keys hanging under the stairs and your shoes in the shed at the bottom of the garden. Let’s face it; you’re going to forget something and hopefully, it’s not your shoes.

By consolidating your pension plans you will have greater control over them. You will be able to reduce worry, costs and time whilst improving your own understanding of them.

You will be able to keep a better eye on the performance of your pensions, meaning that you have a greater chance of fulfilling your financial targets correcting any issues that may arise when they arise.

Know your Tax obligations

Many of us are now internationally mobile or intend to retire abroad so we need to consider how our retirement income will be taxed and also what happens to our retirement pension on death.

If you have a UK pension and reside overseas then unless there is a tax treaty with the UK your retirement pension is likely to be subject to UK income tax as it is treated as UK source income.

You may wish to consider transferring your pension to an overseas arrangement which can avoid potential currency issues and possible increased tax charges.

You should also consider taxation of such income in your host country whilst also being aware of any annual reporting obligations. There may also be wealth tax and other taxation issues on death. If you have a UK pension then depending on the type of pension, there is the potential that on death there could be a tax charge in the UK also.

This is a very complicated area and I recommend setting up a free, 30 minute, no obligation consultation to be able to advise on potential solutions.

Manage Risk

Just ask yourself – “am I in control of my pensions and investments right now?” If the answer is no then you need to take action.

Today’s pace of life is that of a never ending rat race, taking the kids to school, cooking dinner, going to work etc… You don’t have the time to be an investment expert but thankfully, you don’t have to.

Working with me, you will have the assurance that you are only exposed to the amount of risk that you wish to take. I will diversify your investments, spreading the risk to give you a greater chance of high returns. By taking riskier options when young, you have the potential to receive higher returns in the long run.

Monitor your pension

It is vital that you monitor the performance of your pension, indeed any investment. You have to determine whether your investments are still on course to achieving your financial objectives and if they aren’t, you need to take suitable action to pull them back on course.

Not only is it a case of what the economy and financial markets are doing, but that of personal tastes and circumstances. Maybe your risk appetite has changed, maybe you lost your job, maybe you’re planning to start a family!

You need to keep your finger on the pulse and monitor your investments.

Should I buy an annuity?

The decision to buy an annuity depends on what type of pension you may have. If it is a Final Salary Pension then your company will pay your pension according to your scheme rules and the fraction of years that you have been employed compared to your salary. If you have a money purchase arrangement or a Personal Pension then you can decide if you wish to buy an annuity from your current pension provider or whether you shop around for the best rate elsewhere.

However, annuity rates have fallen dramatically in the last few years, leaving many retirees with disappointingly low income levels in retirement. A key reason why expatriates might consider transferring their UK pension into an overseas scheme, such as QROPS, is that they are not subject to the same laws necessarily as UK pensions and allow more flexibility for better income upon retirement.

Under UK legislation you do not necessarily need to purchase an annuity and can take an income from your pension fund (subject to certain limits) whilst also allowing your pension fund to remain invested.

Retiring abroad

In recent years, British nationals have increasingly been looking beyond the UK for employment opportunities and eventually as a place to retire. The Institute of Public Policy Research estimates that while one in twelve Britons of UK pensionable age currently live abroad, this will increase to nearly one in five by 2050. Therefore, the impact of any UK State pension benefits has become increasingly important for expatriates as well as considering changes to private pension provision.

If you leave your benefits in the UK, the benefits could still be subject to UK taxation whilst also the pension fund could be losing value against inflation. You may be better off considering transferring your UK pension to an overseas arrangement that gives you control of your investments according to your circumstances, restrict the impact of currency fluctuations and offer more flexible and tax friendly benefits.

Seek independent advice

Its important for me to clearly understand what your financial matters are and after discussing what your future goals are, I will be able to construct a straight-forward and effective plan to reach those targets.

I have industry know-how to help you reach your financial aspirations by shopping around for the products available on the market and then help you select the most appropriate one. The three main choices are SIPPS, QROPS and QNUMPS.

When it comes to retirement planning, some products may be able to offer you extra income each year or month for the rest of your life.

In addition, if you have medical complaints, it is even more important to seek advice on the international healthcare available to safeguard you for later on in life.

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