Pensions for digital nomads are in demand. The Covid 19 pandemic changed the world of work permanently. Whilst many workers have been encouraged to return to the office, many businesses have realised the benefits of allowing employees to work from home. Technology has shrunk the globe. All that is required is a 4G connection, good WiFi and dedicated workspaces for those who spend time on the move.
Many countries realise the benefits of providing specific Visas for the new breed of ‘digital nomad’. For example, Andalucia in Southern Spain has devised its own version in an attempt to persuade young technology professionals to choose to be based in Spain.
The argument is compelling. The weather, food and way of life are hard to beat and provide a welcome break from the cold northern winters. There are conditions, however, and it’s important to check eligibility before applying. Information is easy to find, and many specialist relocation agents can help ease the administrative burden.
There are clear benefits for the Andalucian economy from increased tax receipts. Digital Nomads only pay 24% tax on foreign-sourced income which benefits the wider economy as they have more to spend in businesses, shops, restaurants and bars. Certain small towns and villages are participating in schemes to make the move easier which will help repopulate and rejuvenate their local economies. Whilst this is all very exciting as we see change becoming permanent, we have to be more creative when advising on pensions for digital nomads.
The challenge of pensions for digital nomads
In the past, moving from one country to another inevitably meant that private pension plan contributions had to be suspended. State benefit build-up was disrupted, and workers paid in a different currency than their home one.
As new ways of working become the norm, so must new ways of planning our retirement. We need to move away from traditional ideas of State and company/individual pension provision. While many benefits are attached to company and individual pensions, including generous tax treatment, if they’re unavailable or unsuitable, we have to consider alternatives.
Today’s workers also have to deal with the effects of the demographic timebomb whereby we will all live longer and State pension systems become increasingly unable to cope. This means most current employees will face a retirement planning challenge.
Modern technology allows individuals to work from anywhere. It is also now possible to create an online investment/pension plan and make contributions to it from various locations and in different currencies. As a result, there is no need to sit down with an adviser, complete paper forms, send by ‘snail mail’ to be processed, wait for policy documents to be delivered, and physically store them in a cupboard. Thankfully, those days are gone!
Pension planning strategy
The first step is to understand your overall financial planning strategy. A properly qualified and experienced adviser can help with this. Part of that process is to identify future financial needs, quantify any shortfalls, suggest solutions that plug gaps, and maximise investment opportunities.
Digital nomads will generally need a much more fluid strategy, which may have to account for changes in tax systems, currency, residence requirements and day-to-day cost of living issues.
It’s important to embrace change and adapt to alterations in our employment and family circumstances. Financial service providers offer multi-market investment management systems that are easy to use, low-cost and flexible. Many expat employees find these products much more in tune with their personal situation as whilst they might move from one country to another, the investment and retirement planning element stays in one place.
If you would like to learn more about pensions for digital nomads, please contact us on the form below.