Over half of the Britons surveyed recently by Aon Consulting revealed that they would like to retire abroad. From the weather to the economy, we Britons are fed up with many aspects of life in the UK and we want out when it comes to our retirement years!
Are you too thinking about leaving these shores for a new life overseas when you come to retire? Would you like the sun of Spain or Cyprus, the culture of Italy, the majesty of Portugal or have you got your sights set somewhere further afield? Australia? New Zealand or perhaps even South America?
One thing that will be uppermost in your mind if you are planning to or dreaming of retirement abroad - other than your ultimate relocation destination of course - is having enough in the bank to fund your retirement. So, today we’re going to look at 7 ways you can make your pension go further so that you can retire abroad and enjoy a great standard of living.
Saving for retirement takes a lifetime – or so it seems! But if you don’t feel you are well prepared in terms of pensions and investments, never fear as it’s never too late to do something about your retirement income. We’re going to look at 7 ways to make more of your money - or just to make more money – so that you can retire abroad.
We’ve decided to put these 7 points in reverse order in terms of likely popularity – but we hope you’ll agree, each is a valid point that could enable you to make your money go further and enable your dreams of a new life abroad.
Retire Later
It was recently suggested that working age Britons will need to work into their 70s in the near future before they will be eligible for the state pension – we’d like to be even more controversial than that and suggest that if you’re below the age of 40 now, there won’t be a state pension when you come to retire.
The thought of having to work on and on before you can get your pension is not favourable – and yet it is realistic for many. If you’re not liking this line of thinking, allow us to sweeten it a little for you! If you have a desire to retire abroad you need to structure a formal plan to make the dream become a reality. Part of the plan will be financially related.
You need to sit down and take a look at your fiscal position, you need to work out how much you will need to retire on, how much you will need for your relocation and you need to come up with a plan to make the figures stack up.
It may be that working for just one extra year and saving hard will give you the extra money you need to make the transition a smooth on – or it could be that you could plan to relocate abroad sooner rather than later but continue your career overseas.
Just because you believe you should be able to retire at 55 or 65 doesn’t mean it’s necessarily financially realistic for you. However, until you know what your financial position looks like, you cannot work towards any goals. Set your goals, set your targets and then you will have a reason to keep on working and you will have a realistic end date in sight, which is far more positive than just working on and on and having no plan and no dream.
Supplement Your Income
Tying in with the above point, rather than just deciding to quit your job and live off your savings the minute you hit your retirement age, why not redefine your retirement? You could move abroad and take on a part-time job. The income you earn could be enough to make the difference between living on a very tight budget and actually having spare cash for little luxuries like eating out for example.
The work you do needn’t be taxing – you don’t have to go back into the job you were doing. Perhaps you have a hobby or skills you could turn into employment abroad, maybe you could teach or perhaps you could just do something menial for a few hours a week to fill in your time and fill out your wallet?
Risk and Reward
As any financial adviser worth their salt will tell you, the nearer you are to retirement the less risk you should be exposing your pension pot to. However, it’s worth mentioning that the greater the potential risk you’re willing to explore, the greater the potential return on your investment.
This does not mean you should gamble with your pension, what it does mean is that you should review your finances with the assistance of a qualified adviser to see if there are more options available to you for the advancement of your wealth through alternative asset classes or investment paths for example.
You really need to review your financial position every 3 – 6 months with professional help to make sure the way your money is managed is in harmony with the goals that you have.
QROPS
Qualifying recognised overseas pension schemes could be a fantastic way for you to diversify how your money is invested in your pension and even achieve tax free income in retirement depending on where you’re planning on retiring to. These pension schemes are backed by HM Revenue and Customs and are ideal for those who are already living abroad or those who want to retire abroad.
You will need to look closely into whether you should transfer pension assets into such a scheme as they are not right for everyone – but they can make the difference for some people between having a heavily taxed and poorly invested British pension and a well invested and managed and tax enhanced pension abroad.
QNUPS
Qualifying non-UK pension schemes are potentially suitable for higher net worth individuals with significant assets invested or saved outside of a traditional pension scheme. Again they come with the potential benefits of better investment options and tax advantages such as legitimate avoidance of inheritance tax – but they are also very complex and so you need to seek qualified advice about your position to determine whether a QNUPS could be right for you.
Tax Deferred Savings
If you take a lump sum from your pension, or you have cash on deposit to save or invest, when you retire abroad you may be able to benefit from tax deferred savings schemes.
There are plenty of options available to expats who keep their money offshore – i.e., outside of the UK or their new nation of residence – to enjoy tax deferred growth. This can allow any interest earned or dividends enjoyed to be rolled back up and allow for compound growth. Tax may be deferred until you cash in the investment, for a fixed period of time or until a point in the future when it suits you to declare your taxable gains.
Such options should be explored with the help of a qualified adviser once you’re ready to retire abroad or once you have relocated.
Portfolio Bonds
The final option worth exploring is a portfolio bond or similar ‘wrapper’ structure that can hold all of your non property based assets under one umbrella and remove them all from the current scope of the EU savings tax directive for example.
This can mean you legitimately save on any withholding tax which can be up to 35% depending on your assets and how and where they are saved and invested. And it can give you greater control and flexibility over the way your money is managed.
If you can legitimately avoid tax, easily transfer money between investments with just a faxed transfer request and you can have access to the best fund managers offshore and onshore with such a wrapper, you can certain potentially make your money go further.
In Conclusion
As you can see, there are ways you can earn more, save more, diversify how you save and even protect your wealth from excessive taxation when you’re really determined to retire abroad.
Some of the options discussed above may not be applicable to you based on your financial, taxation and personal position – and all options can and perhaps should be discussed with a wealth manager used to assisting expatriates and those planning to live abroad.
Once you do change your residency status for tax purposes, having left the UK, many new and interesting financial options open up for you offshore such as QROPS, QNUPS and portfolio bonds – so don’t limit your financial future. Get informed about your options and your choices so that you can have the money you need to retire abroad in style.
Read more about living overseas when you retire in our lifestyle section dedicated to retirement abroad.
