Retirement planning guide

Retirement planning for international professionals like yourself needs a holistic approach that not only helps you identify where you currently stand, but clearly states how you can reach your comfortable, and financially-secure retirement early.

1) Identifying your retirement goals -

People often associate retirement with money. Of course money is a major part of it, but retirement is mainly about living life on your own terms. It’s extremely important to identify what you want to achieve and what makes you happy before you start working towards it.

Different people have different priorities. Understanding what you truly desire in order to feel satisfaction, is key to a happy retirement.

Retirement planning helps you to take a step back and narrow down your goals, so you can make the right financial decisions that secure that ideal future for you and your family.

2) Analysing your current financial position -

Cash flow modelling can help you answer this question. This means working with a financial planner to understand your current spending patterns and how much is needed to support your current lifestyle and your desired lifestyle for the future. Its about answering the question - 'how much is enough?'. This is known as lifestyle financial planning.

Analysing your current financial position will also help you plan out how you can increase your savings and how much money you can start investing.

3) Understanding your income sources -

Retirement income can come from different sources. The tax implications of each of these income sources needs to be considered and altered accordingly.

Over what time period and by what percent will you use this income is equally important, and determining this in advance will help you protect your retirement income.

4) Investment planning -

Investment done right can help you speed up your financial journey and reach your retirement goals early. But it's important to consider the risks involved in these investments.

High risk investments, market volatility and inflation could have a negative impact on your portfolio and consequently on your retirement savings. Planning your investment portfolio based on your appetite for risk and getting expert guidance from a regulated financial planner is one of the key steps involved in your retirement planning process.

5) Planning for unforeseen life events -

Life is a beautiful journey, but unforeseen health issues can come up at any time and hinder your financial plans. These life events can eat into your retirement savings and throw you back by years financially.

Planning for such life events and making sure that you have the best, long-term insurance plans in place that can get you and your family safely out of these storms is another important step in your retirement planning process.

6) Managing your retirement income -

During your working years, you get used to getting your pay cheque every month. But what happens when you retire?

An investment strategy that was once a good fit for you, may not be the most profitable one for you after a few years. Identifying different retirement income opportunities and managing them with constant monitoring is a vital part of your retirement planning process.

7) Continuous monitoring of retirement assets -

Creating a retirement budget and then constantly monitoring your financial position and making required changes is an on-going part of retirement planning.  This continuous monitoring helps you identify where you are deviating from the plan and rectify it before it’s too late.

A good financial planner will help you stay on track to achieve your ideal future.

Step #1:

In how many years from now would you like to be financially free to retire?

5, 10, 20 years?

Write down your number.

Step #2:

How much money would you like to live on annually, once you’re financially free?

If you plan to live modestly, or in a low-cost country, your number might be relatively small – e.g., £20,000 pa.

If you have lavish tastes, or a desire to live in a high cost country, obviously your number will be bigger – e.g., £100,000 pa.

Write down your number. 

Step #3:

Do you own property other than your main residence? (If not, skip to Step 4)

Rental income from property is an inflation buster – because rent rises in line with inflation.

So…

If you own rental property, how much rental revenue per year could be generated from your property today, if it was mortgage free?

Write down that amount.

Then deduct 10% for periods of potential vacancy, and deduct your estimated annual maintenance costs as well.

What number are you left with?

For example – if you own 2 mortgage-free properties each generating £700 pcm in rent after all costs and vacancy considerations, you have an inflation proofed monthly income of £1,400, and an annual inflation proofed income of £16,800.

Write down your number.

Step #4:

What’s your annual shortfall?

When you answered Step 2 above, you wrote down how much you’d like to live on annually to be financially free. If you have rental income, would it be enough to cover the entire amount you want to live on?

If not, what’s your shortfall?

For example, if you want to live on £50,000 and you earn £16,800 from property, your annual shortfall is £33,200.

Write your number down.

Inflation, inflation, inflation.

Of course, unless income from property holdings covers everything you need to be financially free, your annual shortfall will actually be much higher than the number you’ve just generated.

Why?

Because of inflation…

Step #5:

What's your post-inflation income?

Here’s how to calculate your own post-inflation income gap – we can do the numbers for you if you prefer, talk to us and we’ll do all your calculations to get you on track.

What’s your number? 

This is the annual amount of income you want to achieve to enjoy financial freedom when you retire.

Step #7

How much do you need to be saving and investing to hit your portfolio goal size?

Visit this compound interest calculator.

Enter the amount of money you have already saved or invested towards retirement in the Initial Balance field.

Enter 7% in the Annual Interest Rate field (annual average stock market return).

Enter the number of years into the Calculation Period field.

Enter the amount of money you are saving or could save in the Regular Monthly field and ensure you set it to deposit.

Assuming you wish to increase deposits in line with inflation, tick Increase Deposits Yearly With Inflation, and set the rate to 3.5% and the Compound Interval to Yearly.

Calculate…

Are you on track?

For our example, if we had a base amount of £100,000 already saved towards retirement, invested £2,000 a month for 20 years, assuming a rate of growth of 7% and increasing annual deposits by a 3.5% inflation rate, we’d be on track!

Step #8

You can play around with some of the numbers – but not all of the numbers…

You can’t change your age today, meaning if you’re set on retiring in a specific number of years, that limits how long you have to save, and how long your wealth has to grow.

And you can’t change the amount you’ve already saved and invested.

But there’s plenty of good news…

Firstly, evidence shows that in the early years of retirement, retirees are more inclined to travel and enjoy financial freedom than later in life.  Therefore, your requirement for such a large annual sum could alter downwards, meaning you may need less to retire comfortably than you thought.

One of the most important responsibilities of a financial planner is to help you with a retirement spending strategy.

In financial terms, retirement is known as the decumulation, or drawdown, phase.

The decumulation phase is extremely important. If you think about all of the questions to answer: “How much can I spend? When do I take it? How do I take it? Which buckets do I take it out of? How do I manage my tax impact?” All of this makes this phase much more complicated than the accumulation phase.

There's been a great deal of research into retirement strategy in recent years, and Vanguard is one of the companies at the forefront of what is sometimes referred to as the 'science of retirement'.

For a long time we didn’t really much thought to what retirement spending looked like, because we didn’t really have to. Most people were covered by a DB plan, state pension, or private pension.

People weren’t expected to provide for their own retirement to the extent that they are expected to now.

Garrett Harbron, an expert on retirement strategy at Vanguard Asset Management, says this is being compounded by the fact that the baby boomers are retiring, so we have more people retiring each year and people are living longer. The concept of a 40-year retirement 30 years ago was completely foreign. Today it’s very much a reality.

Traditionally, when planning a client’s retirement spending, many planners have relied on the so-called 4% rule. That means the amount the client takes out of their portfolio each year is fixed at 4% of its value on retirement, with adjustments for annual inflation.

There’s been a lot of debate around whether the 4% rule is still valid. Based on Vanguard's research, at least in the UK, we feel like it is. When Vanguard run numbers and simulations for the 4% rule and measures it against an 85% portfolio success rate, that’s over 10,000 simulations, the portfolio has money left after 30 years. 85% of the time they found that the maximum sustainable spending rate is actually 4.17%, so a little bit over the 4% mark.

So, the 4% rule is still valid. But there are alternatives which may suit you better. But bear in mind, this is a highly specialised field, and it pays to ask a professional financial planner to explain the options to you.

As mentioned earlier, the 4% rule is used to determine how much a retiree should withdraw from a retirement account each year.

The idea is the retiree receives a steady income stream, while maintaining a healthy account balance.

It’s considered safe by experts.

This rule seeks to balance out providing a steady stream of income, while also keeping a healthy account balance that can grow, thus allowing income to be withdrawn for the whole of your retirement. The 4% rule is considered a realistic rate, with withdrawals consisting primarily of interest and dividends. The table below shows the success rates based upon the timescale and the underlying investment split. 

For example, if you are 100% invested in stocks, you are able to withdraw 3%, 4% or 5% for 15 years, without running out of money. Sticking with 100% stocks, over 30 years, a 3% withdrawal (after inflation) works 100% of the time, 4% works 98% of the time and 5%, 80% of the time. Your success rates are wholly dependent on the combination of your underlying investments. 

Your company’s pension plan will not be sufficient to fund your retirement.

One of our clients had a rude wake-up call. He was a senior executive at an oil and gas company (earning a lucrative salary with benefits) who expected a large pay-out from his company’s pension plan. 45% of his final salary to be exact.

However, on his last working day, the company broke the news – they had shifted pensions based on final salaries at retirement age to cheaper ones based on a ‘career average’ salary. 

The pay-out he looked forward to was slashed by 25%. He needed to make urgent decisions as he didn’t have the benefit of time on his side. So, he downsized his villa to a humble 2-bedroom apartment and sold his luxury car, placing the earnings from both into a low-cost index fund.

The tropical holiday he planned for himself and his wife was temporarily put on hold.

Now, slowly able to rebuild his wealth, he makes sure others learn from his mistakes – especially his adult children.

He says:

“Don’t rely on your company’s pension scheme. Always have a separate investment that can bridge any possible savings gap.”

There’s quite a lot to understand before you start looking around for the best funds for your money:

1) Risk –

When it comes to investing it’s broadly correct to say that the more risk you’re willing to expose your money to, the higher the return you could potentially enjoy. Likewise, the lower the risk you’re willing to tolerate, the less significant the gains you may potentially enjoy.

It’s really important to understand your own personal appetite for risk.

At the most extreme end of the scale there are investments where your money is not guaranteed, but where you could enjoy unlimited gains.

At the safest end of the scale your investment and returns are guaranteed, but the returns are going to be small.

Your unique appetite for risk is one of the most important things for a professional financial planner to know. This can be done by a comprehensive analysis of your current financial position.

If you’re unsure about your own tolerance for risk get in touch with us and one of our professional financial planners will help you turn your lifestyle into numbers and understand what you need to get and keep the life you want.

2) Asset classes –

There are all sorts of different asset classes such as cash, bonds, property, shares and commodities. It’s important to know about the choice available and the pros and cons associated with each.

We have a guide to help you better understand these different asset classes. 

3) Sectors –

Just as there are different asset classes so there are different sectors to choose from. In investing terms a sector is an industrial area of the economy in which companies provide a similar product or service.

An example of a sector is the defensive sector, which would include companies that are thought to be safer in a falling market such as utilities and healthcare firms. Another example is the growth sector, which tends to do well in a rising market. Companies in this sector could include technology or manufacturing firms. 

4) Markets –

Should you invest in an established market or an emerging market? It’s important to understand the pros and cons of each choice and which nations are considered to fall into each market. 

5) How your money is actually spent –

Some of your money will be spent on the actual investment, but some will be allocated to cover fees and charges. Generally, the more complex the fund and the more actively it is managed the higher the costs. Understanding the fee structure of any investment path you choose is critical – you don’t want to be overcharged compared to the potential gains you could enjoy. 

Fees and costs are necessary but if they are too high they can erode the value of your overall investment. Regulated advisers and fund managers are always transparent about their costs. You need to ensure that what you’re going to be charged is reasonable for what you’re gaining. 

6) Exit strategy –

Before you even commit to investing your money you need to have an exit strategy! The best laid plans sometimes change. Can you access your money if you need to? What are the consequences of accessing your money? Some funds lock you in for a specific term and you cannot access your funds until the end of the term without significant financial penalty.

Understand what you’re committing to – and never ever forget you should ideally have enough in cash deposits to cover about 3 months’ worth of essential outgoings.

Investing should be boring.

Ideally, you should set up the right portfolio for you and your goals together with your financial planner – and then leave it alone.

You should spend less time worrying about your financial future and more time doing things you actually love. 

Successful investing comes down to six principles: 

1. Accept the price 
2. Beware of market gurus 
3. Control your costs 
4. Spread your risk 
5. Be disciplined 
6. Stay balanced 

For even better investment results, a systematic investment approach backed by years of Nobel prize-winning research is the best thing you can do for your retirement planning.

Our science-based approach is grounded in economic theory and backed by decades of leading academic research. While other investment managers have access to the same research, it’s the interpretation and application that sets our funds apart. It’s about identifying what works for investors and what can bring them far greater success by capturing the key ‘dimensions’ that exist in the marketplace. 

Systematic investing encourages investors to stay disciplined, maintain a long-term investment horizon and diversify globally – three things everyone can control. These behaviours/actions will allow investors to take full advantage of time in the markets and is the ideal investment strategy in retirement planning. 

While some people aim to retire early, there are others who want to retire overseas. It’s an understatement to say that there’s a lot to think about when planning to retire abroad, it's easy to get confused and bogged down by it.

We wanted to give you some clarity by covering the 5 main categories you need to consider while planning to retire abroad. These include lifestyle, health, money, pensions and property because we know from our own experience that these are the core areas of concern to the majority of us who are planning our new lives overseas. 

1) Lifestyle -

Getting and keeping the life you desire is the most important goal to bear in mind while planning for your retirement. Understanding whether this lifestyle you have built for you and your family can be enjoyed in the country you're planning to retire in, and the financial implications of the same is vital to your future financial well-being. 

Consider whether you want to fully integrate into this new life. Most importantly, you need a professional financial planner to turn your life into numbers to ensure that the cost of living there does not exceed your retirement savings so you can achieve your ideal future.

2) Health - 

Your overall health and well-being and that of your loved one's should always be a primary consideration in your retirement planning process, no matter which country you plan to retire in. Consider how you can protect yourself through a comprehensive insurance plan. 

Looking into access to carers or at-home medical or welfare support in your new nation, in the event you need it in the future, could also help you plan better for unforeseen future life events.

3) Money - 

When you move abroad, at least semi-permanently, you become known as an expat. And for the majority of expats you also become non-resident for tax purposes in your old home nation – it’s at this point in time that the expat advantage exists for you to embrace.

Understanding how to make the most of this advantage can help you protect your wealth. 

Having a professional financial planner by your side will not only help you retire early, but can help you make moves like this more swiftly. All while protecting your wealth and the life you have worked so hard to build. 

4) Pensions - 

If you have a British pension pot and you’re retiring abroad you have the potential to enjoy even greater investment freedom. You may also be able to transfer your pension into an HMRC-recognised overseas pension scheme. Consider whether your move to retire abroad has any tax implications on your withdrawals or benefits. The key is in understanding where there are double taxation agreements in place, and where retirement income specifically, or foreign sourced income, is taxed at a favourable rate.

With very careful planning you may be able to retire abroad and enjoy your British pension at a significantly reduced rate of tax. You have to select the right country and abide by all qualification rules however – and you should take expert advice before making any decisions.

5) Property - 

If you want to avoid common risks, take your time to get to know a place by renting a property there first. Learn the local language and then take your time to ask, enquire, explore and observe everything you need to regarding the property market. Chances are, if you finally do buy a property, you will pay less for more, and get an overall better and safer deal. 

No other country has a property market as fickle as Britain. While the British market is protected by laws and regulations, it is also a market that booms and busts regularly. Elsewhere in the world there can be regulations and blocks in place, in the form of taxation for example, to deliberately take heat out of a market and prevent this damaging cycle. This can also prevent you making any profit on property bought there however, making it all the more essential to think it through thoroughly so it does not have a negative impact on your retirement plan.

A regulated life financial planner can help plan your finances around your goal to retire abroad and handle the drudgery so you can focus on the things you love.

1. QROPS: Qualifying recognised overseas pension scheme

What is QROPS?

A QROPS is a pension scheme outside the UK that has informed HMRC that it meets certain UK requirements, and so can take transfers form UK registered pension schemes.

Potentially suitable for

People with existing UK pension rights, who are planning to retire outside of the UK on a permanent basis, or expats already living outside of the UK.

In addition, those close to the Lifetime Allowance (the “LTA” – £1.073m in 2020) may also benefit from a QROPS, to mitigate future tax liabilities for exceeding the allowance when drawing their benefits.

Residency considerations

Those taking out a QROPS should be living outside of the UK for tax purposes, or planning to leave (it is to benefit those intending to move permanently from the UK that UK government policy permits transfers to overseas pension schemes without a tax penalty).

QROPS are open to anyone with a UK pension, including UK residents, expats, and non-UK nationals working in the UK but who are now residing in another country.

New considerations following 2017 Spring Budget

As announced in the Spring Budget 2017, a 25% tax charge will now apply to pension transfers made to QROPS. Exceptions will be made if both the individual and pension scheme are within the EEA.

Reporting considerations

QROPS have very specific reporting requirements.  HMRC says:

"all payments are reportable for ten years after the transfer-out of the UK registered pension scheme." 

The responsibility for reporting lies with a QROPS’ trustees.

Note: If you’ve heard of QROPS and ROPS (recognised overseas pension schemes), and wondered what the difference was, a QROPS is a ROPS which has given undertakings to HMRC to provide information about member payments etc., and certifies to HMRC that they meet the qualifying criteria.

Income

To be a ROPS, the ROPS’s rules relating to how you take your income have to be very similar to those governing UK pensions.

The maximum tax-free lump sum available (called a Pension Commencement Lump Sum (PCLS)) will typically be either 25% or 30% of the fund, depending on the jurisdiction of the QROPS and how long you have been a non-UK resident.

Some jurisdictions are not restricted to using UK Government Actuaries Department (GAD) rate limits for calculating how much income you can get. This means you can potentially get a higher income level from a QROPS compared to a UK defined benefit scheme.

Funding restrictions

QROPS cater to transfers from UK pension schemes. Typically, assets will have to be liquidated before they can be transferred to a QROPS.

Age limit

The maximum age to commence taking benefits is normally 75.

Double taxation agreement considerations

Ideally, the jurisdiction chosen for the QROPS should have an appropriate double taxation agreement with the QROPS member’s chosen country of residence in retirement – or satisfy certain other specific conditions.

Overseas Transfer Charge

Tax charges can arise on a transfer to a QROPS, but not if the member is resident (and stays resident for five UK tax years) in the same jurisdiction as the QROPS – treating the whole of the EU as one single jurisdiction for this purpose.

Inheritance tax and death considerations

QROPS funds, like UK pension funds, are normally exempt from UK inheritance tax.  But, the country where the investor is resident at death may impose some form of inheritance or death tax.

Positive aspects of QROPS

1. You can consolidate several smaller pension funds into one to create greater buying power, and potentially better investment opportunities.
2. A 25-30% tax-free lump sum at age 55+.
3. 100% is transferable to beneficiaries.
4. UK and non-UK tax residents can use QROPS for LTA planning.  A transfer to a QROPS is a Benefit Crystallisation Event (BCE), and under current rules, once pension funds have been transferred to a QROPS, they are able to grow without further assessment of LTA limits.
5. Depending on whether there’s a double taxation agreement (DTA) between your country of residence and the country in which the QROPS is set up, there may be potential tax advantages.

Negative aspects of QROPS

1. QROPS trustees must report to HMRC.
2. There can be high transfer charges. They are sometimes mis-sold, not UK regulated (although they are regulated locally), and can incur additional tax charges if not used correctly.

3. SIPP – Self-invested personal pension

A SIPP is a form of a personal (defined contribution) pension scheme, set up in the UK and registered with HMRC.

Potentially suitable for

Anyone with existing UK pension assets who wants to benefit from the flexibility of a defined contribution scheme with unrestricted investment options.

Residency considerations

Most SIPPs are only available to UK residents, but some SIPPs are available to non-UK residents and those looking to move to the UK.

Reporting considerations

The SIPP member must report taxable events to HMRC via a ‘self-assessment’ tax return (which is true of any income that may be UK taxable).

The trustees of a SIPP will also report certain member payments, e.g. when taking a PCLS or drawing an income.

Income

Income can be taken from age 55 or later.

Income can be drawn from a SIPP fund right up to death.    

Funding restrictions

Other personal pension schemes and many occupational schemes can be transferred into a SIPP.

Cash contributions can be made too. However, tax relief is limited for the first 5 years of non-UK residence if the SIPP member is an expat, and the lifetime allowance limit also applies.

The lifetime allowance is currently £1.055 million.

The lifetime allowance is the maximum value of benefits that can be taken from a UK registered pension scheme such as a SIPP without being subject to the lifetime allowance charge (potentially up to 55%).     

Age limit

You have to be under 75 and usually a UK resident to start a SIPP.

Double taxation agreement considerations

If you live somewhere with no double taxation agreement with the UK, income is subject to UK tax.

You may be able to reclaim an element of this, but it could mean that you are also taxed in your country of residence.    

Inheritance tax and death considerations

On death before age 75, the fund can normally be distributed, inheritance tax free, to a spouse and/or dependants. This is subject to a test against the lifetime allowance.

If death occurs after 75, any tax that’s applicable will be based on the tax status of the beneficiary. This would not be subject to a test against the lifetime allowance.

Positive aspects of SIPPs

1. It is possible to invest in a wide range of underlying assets.
2. SIPP members can transfer assets in from other pension schemes.
3. The set-up costs are lower compared to some QROPS.    
4. There is no IHT on death.
5. A SIPP provides full access to UK pension flexibility, allowing the whole amount of a pension to be drawn on if required (although this is not advisable, as a pension is designed to provide an income in retirement).

Negative aspects of SIPPs

1. SIPPs can leave the member open to UK taxation if there is no double taxation agreement in place between the UK and their country of residence.   
2. There are no tax planning opportunities based around lifetime allowance or benefit crystallisation events.

You may have friends or colleagues who’ve transferred their pension into a SIPP or a QROPS - and perhaps you’re wondering whether you should do the same.

Here are the differences and various pros and cons to help you decide.

Pensions get quite technical, and the personal circumstances around your pension and retirement needs are unique.

So, do seek expert help from a qualified professional adviser before taking any action.

Self-invested personal pension (SIPP)

SIPPs are UK-registered personal pension schemes. They are defined contribution schemes (meaning only the contribution you make is defined - there is no guaranteed level of income at retirement).

They are generally funded by an individual, and abide by UK legislation with regards to tax, and when and how they can be accessed. SIPPs have become very popular in recent years, driven by their relatively low cost - and the wide investment choice they offer. 

It’s important to remember though, that SIPPs are UK-based, so if you are living abroad the advantages of using them can be limited. For example, pension contributions in the UK to a UK-registered scheme receive tax relief of at least 20% per year...  

However, if you live abroad and are paying into a UK-based scheme, tax relief will only be available for the first five tax years of your non-UK residence and you will also be subject to a cap of £3,600 per annum.

Like all UK pensions, SIPPs received a boost a few years back when new rules came into effect providing people with fully flexible access to their defined contribution pensions (including SIPPs). This flexibility simply means people can decide for themselves when and how they take their pension income, after the age of 55.

Qualifying recognised overseas pension scheme (QROPS)

First, a quick piece of myth busting, and a little warning to make sure you don’t fall foul of UK pension rules. A myth wrongly and often perpetuated by people who promote qualifying recognised overseas pension schemes (QROPS) is that a scheme has received approval from HM Revenue & Customs.

They may refer to it as being an “authorised” or “approved” QROPS. This is completely untrue. The reason people choose to refer to them like this is for one of two reasons – ignorance or intentional deception.

If someone uses these words to describe a QROPS, while trying to convince you to transfer, be extremely cautious. QROPS are also sometimes sold as a way to simply empty a UK pension, “tax free”.

If HMRC believes UK tax-relieved pension assets have been accessed improperly or invested in ways it doesn’t permit, you could face a substantial tax charge.

QROPS are actually very similar to SIPPs, as they are defined contribution schemes, but they are based outside the UK. They can be based in any country around the world, and qualify as a QROPS as long as the scheme meets specific requirements set by HMRC.

As mentioned, HMRC does not vet individual schemes – the scheme trustees notify HMRC of their existence and self-certify that the scheme meets the criteria. After this, the scheme will normally become “recognised” by HMRC, and will often (but not necessarily) be included on a list published on its website. 

QROPS are intended for people who are planning to, or have already left, the UK. The main difference between a SIPPs and a QROPS is the additional tax benefit a QROPS may bring to those living outside the UK.

QROPS and the lifetime allowance

One of the biggest benefits of QROPS is around something called the lifetime allowance (LTA). Under current UK legislation, you can only accumulate a tax privileged pension fund of up to £1.073 million, unless you apply for certain types of protection which can boost this to higher levels in some circumstances.

This means pension savings above the LTA may be taxed at up to 55%. However, if you transfer your pension into a QROPS, it is tested against the LTA at the point of transfer, and not again thereafter.  

This means, if the value of your UK pension fund is close to the LTA, it may be worth considering a transfer into a QROPS to avoid being taxed on your pension savings above the LTA in the future.

"Should I transfer my UK pension?"

As well as understanding what SIPPs and QROPS are, it is vital that you understand the benefits of the type of scheme you currently have.

There are two types of UK pension scheme – defined contribution and defined benefit. Defined benefit schemes are colloquially known as “gold-plated pensions.” They provide scheme members with a pension that is intended to be guaranteed.

These schemes are becoming rare due to their cost - and if you have one, you should think very carefully before transferring from it. It is also now required - by law - that anyone considering a transfer from a defined benefit scheme worth more than £30,000, including into an overseas scheme such as a QROPS, must have taken financial advice from an adviser qualified to provide UK pension advice.

Such an adviser has to be authorised by the Financial Conduct Authority.

Your pension is one of your most important financial assets and any decision to transfer it, should not be taken lightly.

As an international executive who’s worked hard for your money…

The most devastating thing would be to see your ideal future up in smoke because of one poor decision.

Particularly if you can get an overseas enhancement to the lifetime allowance.

Here’s a real-life story of a global citizen, just like you, who managed to turn his finances around in the nick of time.

Most high-earning executives in Dubai have been called by an army of financial salespeople.

You’ve probably been given unsolicited advice around the “best thing” to do with your pension (or the best products to invest in).

The salespeople sound friendly, well practised and drop in buzzwords around alleged tax savings.

It's why so many people are falling for their tactics.

Our client, John, an engineer based in Dubai, was one of them.

He came to us for a free second opinion about his anxiety around keeping the future lifestyle he wanted.

This included a QROPS valued at £800,000.

At the time, his previous ‘adviser/salesperson’ recommended he and his wife transfer into two individual QROPS schemes.

His pensions had been structured as a QROPS, with an underlying bond as the platform.

(A bond is a tax wrapper, so is a QROPS or SIPP).

Having a tax wrapper within a tax wrapper can complicate financial plans.

In this case, it made him liable to unnecessary charges.

These opaque charges funded the commissions of the salesperson.

Moreover, the QROPS was expensive and ineffective.

John now lives in the UK, so it would potentially make sense to move his pension back to a UK-based, low-cost SIPP.

However, we recommended a different solution – for him to retain the QROPS wrapper for the following reasons:

• Since John planned to retire abroad, it was more beneficial to retain his QROPS status, as it allowed him to pay out a pension income or capital in different currencies. 
• He could draw his pension income free from UK income tax when he retired outside of the UK.
• If he lived outside the UK long enough, he could draw a higher tax-free initial sum of 30% in retirement, as opposed to 25% (SIPP).
• He was in his early 50s and by the time he reached his expected retirement age of 65, he would've grown to exceed the lifetime allowance of £1.073 million. 
• If he transferred his pension back to a UK SIPP, he would be taxed 55% on amounts that exceed £1.073 million.
• Finally, he had limited capacity to make future contributions to his pension and obtain tax relief, as he was no longer working. 

We advised him to retain his QROPS status and transferred him to a lower cost, far higher quality provider.

After which, we introduced a low-cost platform and removed the unnecessary bond tax wrapper.

We rebalanced his portfolio through a low-cost, evidence-based strategy.

Reducing his ongoing charges by 3.48% per annum (or saving £27,840 based on a value of £800,000), whilst substantially improving his long-term investment performance.

Perhaps far more importantly, our review allowed for the crafting of a tangible financial plan and investment policy to address John's anxiety and focus on his most cherished goals.

Backing this robust lifetime investment plan with cashflow projections and a highly supportive, professional service.

This was of inestimable value as it prevented the plan from blowing up at some fleeting moment of market or emotional stress.

Remember, there could be many potential solutions for you depending on your circumstances in pension planning.

Transferring your overseas pension is a huge decision.

So, make sure you understand exactly what pension you have and its unique implications.

Its safe to assume that at least 90% of your personal lifetime investment returns will be driven by:

(a) The primacy of a documented financial plan.

(b) How much of your investments are sensibly allocated to equities as opposed to bonds.

(c) Whether or not, in response to an extreme market fad (BitCoin), or fear (COVID-19 crash), you break faith with your plan.

Salespeople don’t discuss planning because they are paid by focusing your attention on the product. A professional financial planner can help give you gain clarity, confidence and control over your pension planning. 

Your retirement years can be some of the happiest of your life. You have saved and worked hard to reach the point when you can relax and put all of life’s little worries behind you.

However, there are many pitfalls and dangers which can hamper your retirement dreams and unfortunately many people are more than happy to relieve you of your hard earned cash.

Here are some of the facts and information you need to help you avoid some of the common, costly mistakes which people reaching retirement are all too often victim of.

The information here is specifically aimed at those who are British expatriates with a pension in the UK and are reaching retirement or are considering moving outside the UK either in the near future or in their retirement years. It is also for UK “non-doms” who have permanently and definitely left the UK but still have pension benefits there.

Pensions can be very complex and it is important that you seek independent advice from a qualified financial planner before making any decisions.

For ease of understanding, let’s split this into three parts:

Part 1

Is for those with a “money purchase” pension scheme such as a personal pension, stakeholder pension, self invested personal pension (SIPP) or an additional voluntary contribution plan. These pensions are of the type known as defined contribution (DC) schemes and this is how we will largely refer to them throughout for ease.

Part 2

Is for those who have a “defined benefit” (DB) – also known as a “final salary” pension scheme. If you aren’t sure what type of pension you have, ask your pension provider or contact us using the form at the back of the guide and we can help you.

Part 3

Offers some guidance on how you may want to structure your pension investment portfolio so you can make your money last as long as possible. Specifically, we will look at decreasing your investment risks and how you can position your investments to provide income and protect against inflation.

Your retirement savings have taken you a lifetime to build and, while you may still want to invest, you cannot afford to lose significant sums of money.

You will not get another chance to build your pension savings. There are unscrupulous salespeople out there who are more than happy to take your cash and to invest it into high risk, high commission funds, which often fail.

The only winners in these cases are the salespeople who are paid vast commissions and will then disappear as soon as there is trouble. Before you begin planning your pension investment portfolio, make sure you discuss your attitude to risk with your financial adviser.

There are three big considerations you must take into account when setting up your portfolio for retirement:

Option 1

Income – generating enough income for your desired lifestyle

Option 2

Longevity – making sure your money lasts through your retirement

Option 3

Inflation – stopping your capital from losing real value

No one likes to think about mortality. But the reality is harsh and unavoidable. It can be even harsher for those you leave behind.

Life is a wonderful contradiction. On the one hand, everyone is living longer than ever. On the other hand, more people are dying from accidental deaths, heart diseases and strokes (and from a younger age too).

Most of us have car insurance for the likelihood of an accident, theft or breakdown taking place; home insurance to cover the material goods held dear; and medical insurance that protects us during illness.

But if you die prematurely without adequate life cover in place, what would happen to your loved ones? Life cover protects your loved ones so your children can finish college if you’re not around to pay for it and your family can maintain their standard of living without your regular income.

It’s vital to plan for any, and all, eventualities. It’s also important to know that different countries have different laws pertaining to deaths and dues. Loans, fines and credit cards usually need to be paid by surviving family members.

Investments, estates and trusts have long approval processes, meaning it could be months or years before your loved ones are able to access what’s inevitably theirs.

These financial burdens can be avoided. Or, in the very least, alleviated. Today, your premiums are the cheapest they’ll ever be because, right now, you’re at your youngest. 

As you get older, the expected premiums increase every year. So, the earlier you start a protection plan, the less it will cost you on a monthly or annual basis.

Simply by taking action today, you can secure your loved ones’ financial well-being.

In the event of your death, they’ll receive a lump sum to help pay for expenses and maintain their standard of living.