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Looking to the Future: Pension Planning

‘Living the dream,’ the catchall for getting out of the UK rat race and emigrating to warmer climes is often a misnomer. Whilst expats to Bulgaria maintain that quality of life is certainly much improved by a move here, everyday reality soon returns once you have settled in and the country starts to feel like home. Most expats under retirement age have bills to pay and an income to earn, kids to enroll in school and medical issues to sort out, but one area that keeps getting pushed to the back of our minds, or worse still not even thought about is pension planning.

Just because you are living the dream in Bulgaria doesn’t mean that you are Peter Pan; one day you are going to need an income and you may be too old to find or carry out work. There are many options for expat pensions, which probably make the issue all the more confusing, however confusion is not a reason for procrastination! The sooner you start paying into an expat scheme, the more money you will have when you come to retire.

Making a Contribution

We are all living longer and by living a stress-free life in Bulgaria with a typical Bulgarian diet (minus the Rakiya) we all stand to live well past the average age, which means that we need to start planning for the day, when we can no longer spring out of bed and off to work. Believe it or not, there are plenty of options for expat pensions, more than if you had stayed at home. Obviously you can keep paying into an existing UK personal pension scheme if you prefer and you can keep up national insurance payments to secure you state pension. There are off -shore schemes, Qualifying Recognised Overseas Pension Schemes called QROPS (pronounced “queue-rops”) and whilst you may think you can’t afford it especially with the global recession knocking at your door, even a small contribution each month is better than nothing at all and its far better to have ten years of contributions than facing the fear of retiring on nothing at all or very little. By the time you retire Bulgaria will be more prosperous, it is likely to be a member of the eurozone, which means that prices will have risen considerably from their present levels. You also need to consider that in the future 100 lv. will not buy what it does today thanks to the negative effects of inflation.

More Advantages for Expats

There are certain benefits to being an expat when it comes to pension planning. For a start you may find there are tax advantages when investing off-shore. Pension funds are generally linked to the stock exchange and it is worth taking good independent financial advice to get a pension that will best suit your needs. Pensions are long term savings plans and you should not be deterred from starting now just because stock markets are on a downer. Over the long term, if you are not happy with your plans performance you can always change your level of risk. Don’t panic if you feel you have left your pension planning too late; starting now can address these issues in the long term.

 

 

What’s on Offer?

You must get independent advice before making a decision about your pension and you can find this online, by searching for ‘expat pensions advice.’ QROPS schemes enable you to consolidate existing pension schemes that you have built up whilst living in the UK into approved off shore schemes. Off shore actually means another country rather than putting your money on an island based fund, so in effect you could transfer all of your existing pensions to Austria or New Zealand if you wanted. The UK government permits anyone who is no longer UK resident to transfer pension funds under the QROPS scheme out of the country either as soon as you emigrate or several years into your emigration. If you emigrated less than five years ago there are some constraints on your off-shore scheme, but these fall away the minute you have been out of the country for more than five years. After this time there are numerous benefits to a QROPS pension including a greater freedom over your investments, the ability to access funds, no need to buy annuities, no tax, transfer benefits on your death and no UK inheritance tax. It is best to act now because there is no telling how long the government will keep the QROPS scheme going.

Common Excuses for Delaying Pensions

  1. ‘My property is my pension.’ This works if you own more than one property particularly if you have one in the UK, but if you only have the one or your own several cheap Bulgarian properties, you should consider the fact that by selling your main residence you will still need somewhere to live and prices for smaller properties will be higher than the present rate possibly leaving you with less money than you had hoped.
  2. ‘My kids will take care of me.’ Do you really expect this to happen? Are you taking care of your parents right now or is it the other way round? Our children are more likely to look to us for help in their adulthood than the other way round. They will have their own financial problems to contend with and you cannot be sure what the future holds in terms of your relationship with them.
  3. ‘I will not live that long.’ Unless you know that you are dying from a terminal disease or you party so hard that an early death is assured this excuse does not hold water. The United Nations statistics put the average UK life expectancy at 79.4 years equating to 77.2 for men and 81.6 for women. In Bulgaria the figures are slightly lower but as you have not lived a typical Bulgarian life they won’t really apply to you, so on average you can expect to have around 20 years of old age (from age 60). That is a long time to be skimping around and even if you only manage 5 extra years this too is a long time to live on little money.

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