Job Discussion Forums

[Teacher in Rome]

I've lived and worked abroad for many years, and doubt that I'll be retiring in the UK. State pensions in Italy are what you could describe as a mess. Any advice about private pensions? Are they worth it? How would you know if they're sound and that the money hasn't been invested in something dodgy?

I'd really be interested in hearing what others are doing / have done and if they have any tips on decent pension funds.

[FGT]

As far as I'm aware you have to be resident in Uk to contribute to a private pension plan there. There are other investment/savings schemes but not pensions as such.

[scot47]

People contribute to persoanl pensions becasue there is a tax advantage in the UK IF YOU ARE PAYING UK INCOME TAX.

If you do not pay UK income tax there is no reason to tie up your money in a complex pension scheme. Use a more flexible scheme based on unit trusts (mutual funds in Amerispeak).

If you have worked in the UK you may well be able to continue contributions to National Insurance which can give you entitlement to State Retirement Pension.

[shmooj]

I've actualy got a financial advisor working on this for me at the moment. Once she gives me the lowdown, I can post a summary of options here. I pay no tax in the UK so it will be from that POV.

[roadrunner]

Personal pension plans are widely discredited these days, primarily because of the charges which they attract which eats into their earning capacity, particularly in the early (and most important) years. Also, any type of pension legally compels the holder to purchase an annuity with the majority of the accumulated funds on retirement, and these are widely regarded as very poor investment choices. Also, although the contributions are tax-free, the payments from the annuity in retirement aren't, hence the labelling of pensions as tax-free devices is not - strictly speaking - correct.

Apparently, a much better investment vehicle is an Index Tracker (which tracks the London Stock Exchange - shares are, over 5 years or more - much the safest form of investment for long term investors), which can be contained in an ISA. A comparison of about 5 or 6 products would reveal the best product, that is one with low charges, a high degree of accuracy in tracking shares, and one that has been in existence for a few years at least. Also, when you retire, you won't be compelled to purchase a low-yielding annuity, like an investor who invested in a pension.

I think it's much better to take the autodidactic route when it comes to personal finance. After all, a financial adviser, for all their sincerity, is primarily a salesman, and that "profession's" history is a rather chequered one, to say the least.

[shmooj]

I guess financial advisors are like investments then really - both are a gamble anyway.

[voodoochild]

Buy property instead

[shmooj]

Doing that and it is working out well. I'd advise it. I don't think I will be able to believe the price difference between what we paid for our property 8 years ago now and what it will be worth in real terms both in terms of rental income and market value by my retirement age.

I'm looking into a pension simply because my upcoming new post offers to match pension contributions and I would be nuts to pass that up while it lasts. At the very least, I can cash it in when I leave the company and get some return for them paying in for me.

BTW, I have had a reply from my advisor and for those of you eligible for a state pension in the UK, you might want to check out this site where you can find out how much you are likely to get if you make extra contributions to a Second State Pension. It makes for a good rule of thumb.

http://www.pensioncalculator.org.uk/pages/calculator1.php

[shenyanggerry]

In Canada at least, you have a choice. You invest as you have been for years in your RRSP (registered retirement savings plan) but must start withdrawing from the plan at age 69. At age 69 you convert your RRSP into either annuities or a RIF - registered income fund. A RIF can be almost any combination of savings from government bonds to penny tech stocks.

The minimum withdrawal formula is something like (amount in RIF)/(95 - your-age). The result is the minimum amount of your remaining funds you must withdraw that year. The money is taxable. i.e. you are 75 with $100,000 in your RIF. $100,000/(95-75)=$5,000. Minimum withdrawal, $5000.

And yes, I believe the formulas were created by government bureaucrats.

[Gordon]

Shenyanggery,
What did you do in your pre-EFL life? If I have any Cdn tax law questions, I'll know who to ask.

[shenyanggerry]

I'm retired from CN Rail. I got a bribe to retire so I have some RRSP's.

[Teacher in Rome]

Thanks for the link, Shmooj. I did a rough calculation, and it told me I would get 15 quid a week. If I gave up all food and rent, I might even scrape by on that...

I don't think that non-residents can buy an ISA. When I last asked, I was told I'd have to be paying tax in the UK.

So maybe unit trusts / property are the best ways to go. Did you deliberately buy to let, or was it something that just happened? I know it's possible to buy a place in the UK from abroad, but I'd rather buy a place for me to live in here and avoid the high rents. There's no way I can afford to buy two places - even on a buy to let principle.

Anyway - many thanks for all the responses!

[SueH]

Have a look at the Financial Services Agency's web site, or the Inland Revenue's for that matter.

In the case of low cost stakeholder pensions for example you need be resident, or have taxable earnings in the UK, or have been resident when you started it or have been ordinarily resident in the last 5 years - or you or your spouse have to be a Crown servant serving abroad - summat like that. The government adds to what you pay by refunding the tax - so contributing 2808 GBP and they make it up to 3600GBP.

If you are resident you don't even need to have earnt anything yourself, so if somebody gifts you 2808 which you pay in it still gets the tax relief.
Somehow I don't suppose any of that helps you!

[shmooj]

Re buying to let, no we didn't initially plan it that way but have ended up renting our property 7 years out of the 8 we have owned it so far. Now, we don't consider it our own dwelling anymore and have already started looking into buy-to-let mortgages available to non-residents for a second property. We found several that were pretty reasonable. The only downside is that the deposit is relatively high. You're looking at having 15% up front. If you have that, you can pull in a mortgage without being in the country from a number of sources.

FWIW, our first property is in an urban high rental area in the north east of England. This makes for almost continual tenant availability as well as much lower costs than elswhere in the country. Sure, rent is lower, but the properties are dirt cheap even with the latest boom in prices.

One example: there was a three bed terraced place available for less than 10k last time I looked. Needed a little work but at that price what the heck.

[FGT]

Tried the pension calculator (thanks), it predicted a weekly income of �1 !!!! I think I'll stick to property - after mortgage is paid off, predicted weekly income �150+ (allowing for agent's cut).