Planning on retiring abroad? It can be a challenge to identify a suitable retirement solution as an expatriate. As with any financial product, there is no ‘one-size-fits-all’ answer. Below are some important issues for consideration regarding offshore pension plans.
Offshore retirement plans
Offshore retirement plans are designed by international banks or insurance companies and tailored for the expat community.
- You can make contributions from anywhere in the world
- Contributions are flexible – you can increase, decrease, stop and restart contributions to suit your personal circumstances
- Premiums can generally be paid in Euros, Sterling, US Dollars, or Hong Kong Dollars
- A savings term is established at the outset of between 5 – 25 years
- You will have access to a broad range of investment funds
- The plan can be structured to take advantage of the favourable tax treatment offered to investors in certain tax jurisdictions
- There is no tax relief on contributions as in many domestic pension schemes
Risks associated with offshore retirement plans
The most significant risk associated with the use of international retirement plans is that your money is invested directly on the world stock-markets by fund managers. The value of the plan is not guaranteed and therefore can go up or down depending on the investment performance. Risks include:
- stock market volatility
- regulatory changes
- tax changes
It is important that expats compare the various plans on the market and carefully scrutinize any contract before opening an account.
Transfer of existing retirement plans
For those seeking to retire abroad, it may be possible to take your domestic retirement plans with you. The UK in particular has established a new regime for overseas pension transfers to what are known as Qualifying Recognised Overseas Pension Schemes (QROPS). Such schemes have to be approved by home country governments in order to be recognized as acceptable transfer vehicles. For more information please watch our QROPS video
Factors to consider outside of the retirement plan
Before choosing your offshore retirement plan, there are some additional issues for considerations. These include:
- Retirement Destination – If you intend to retire abroad, it helps if you understand/speak the local language, and are familiar with the customs, cost of living and political climate of the country in question
- Timeline – Those that work overseas often enjoy a greater disposable income. This may enable them to save more and retire earlier. It is important to factor in the impact of inflation on your future standard of living. A useful international salary and inflation calculator can be found here
- Future Expenses – How much will you need to save for your retirement? Major expenses such as children, home purchase, vacations and medical bills should be factored into your retirement strategy.
- Inheritance – Have you written a ‘will’? Is it your intention to pass on assets to your family or loved ones?
Retirement planning for expats
AXIS Strategy Consultants offer pension planning services to expatriates with a view to helping them understand their retirement options. If you would like to find out more, please download our free guide on offshore pensions.