The last thing on anyone’s mind as they secure a new post in Australia, Singapore, Shanghai or the United States is a pension. However, it can take almost a working lifetime to ensure you have adequate pension provision.

The cheapest way to achieve this is to persuade your employer to make additional provision via the firm’s offshore pension fund, if there is one, which may cost you nothing. Alternatively, if the employer doesn’t run an expat pension scheme, you could ask the firm to contribute to a pension, typically 10% with you contributing another 5% of your salary.

However, many expats will have to make their own pension arrangement and the first time they may think about their retirement planning is when it is already getting too late.

Avoid tying up your money in a long term offshore savings plan, as contracts frequently change!

The Annuity Basics

• The amount you receive from a conventional annuity depends on age and health, how long you’re likely to live, interest rates and the size of the pension fund. Also ask yourself if you need an annuity with or without a widow’s or widower’s pension.
• There can be as much as 25% difference between rates offered by insurance companies. People with poor health can get up to 100% better rates by shopping around, as can smokers.
• The most common kind of annuity has fixed payments, but an immediate high income may mean poverty in the longer term as inflation erodes income value. More risky are unit linked annuities where monthly payments may go up or down with unit prices.
• Some annuities escalate by a fixed amount each year. If your health is poor, a higher level pension rather than an escalating unit linked one might be more suitable and a guarantee that payments will continue for a fixed length of time.

Retiring in the UK

If you plan to retire in the UK it is best to start a UK pension plan before you go abroad, such as a self-invested personal pension (SIPP) or stakeholder. As an expat you are eligible for basic rate tax relief on pension contributions up to £3600 for the year in which you leave the UK and the five following tax years, even if you have no relevant UK earnings, assuming you were in the scheme when you were in the UK.

After this time there is no tax relief for expats, so there is not much to be gained by continuing to make contributions to the UK pension while abroad beyond six year’s absence.

If you take out a UK pension whilst abroad, the marketing and sales laws of the overseas country would need to be complied with. As a general rule, providers will not accept new memberships from expats. Some countries, such as Australia, also levy tax on non-Australian investment growth funds, including ISA and personal pensions, for long-term expatriates.

An individual can pay into a UK pension whilst also paying into a private international scheme, depending on the local rules of the country. As every country has different tax and social security laws this area is fraught with complications, so check with your tax adviser first

One other possibility is to save money in an offshore deposit account whilst overseas and then make a bigger pension contribution including tax relief once you are back to UK.

TIPS about SIPPS

A Self Invested Personal Pension works in the same way for contributors, tax relief and eligibility as a standard pension; however, SIPP’s are more flexible, are best suited for the more sophisticated investor and may also be suitable for short term UK expats.

A conventional personal pension usually involves the plan holder paying money to an insurance company for investment in an insurance policy, meaning the money is invested with relatively little choice or freedom for the plan holder. A SIPP allows you much greater freedom about what to invest in and for the plan to hold these investments directly.

You can control investment strategy or appoint a fund manager or stockbroker to manage the investment. High earners can do a DIY job by choosing their own shares or wider range of investment funds including cash, equity, gifts and emerging markets.

ExpatSIPP.com

ExpatSIPP.com aims to support expatriates in all decisions that make or break the success of their pension investments, including choosing the best pension experts, improving their wealth management strategy, lowering the cost of wealth management and optimising the UK pension advisers.

ExpatSIPP.com is the only global Expat Pension Transfer platform that is completely independent of banks or other financial service providers.