The Ticking Retirement Time Bomb – Are Expats Safe ?
In todays turbulent times its not easy to pick up a paper these days or watch the leading news reporters comment or mention the subject of pensions and retirement planning without the sensational derogatory headline or two.
We are constantly being inundated with facts and figures, statements over changing demographics, and alarmist commentary over our working generation sitting on a ticking time bomb when it comes to our retirement.
There has been much debate on the gender issue and how female employees can find themselves disadvantaged compared to their male counterparts when it comes to planning for retirement.
Are Expats safe ?
Although much less documented today, another grouping of individuals who can often find themselves challenged when it comes to retirement planning are those working internationally – the expat community.
Expats living and working outside their domiciled country can often find themselves facing further challenges than if they were working in a domestic environment.
Planning for retirement requires a long term, flexible and sustainable strategy.
Working in another country can mean that the longer term future is often unclear for a number of reasons, such as the possibility of having to return home to care for sick or elderly relatives, language challenges, tax and legal reasons, children’s schooling issues and the changing economic climate and prevalence of short term contract work.
It is difficult to plan for the longer term in any case but when the short to medium term is still very much uncertain and unclear then this becomes even less manageable, generally leading to one adopting the ‘ostrich approach’.
It is clearly understood that in many OECD member countries ageing populations and reducing birth rates are the key underlying issues with pension funding.
And we read all the time how market slides can wipe billions from the value of pension funds, which is enough to scare anyone.
In many of these OECD countries they are still very much in the process of challenging and dealing with their pension deficits and are generally adopting three approaches through various economic reforms.
The first approach is to simply increase the pensionable age – a policy being adopted by the majority of countries, including the UK.
The second way of achieving the balance between adequacy and sustainability, and which is being adopted by many OECD member countries, is to focus and concentrate funding and benefits on the most vulnerable.
Whilst the third most effective solution is to encourage individuals to save for their own retirement through government backed automatic enrolment schemes such as the Kiwisaver scheme in New Zealand, the Riester scheme in Germany and the more recent NEST scheme being rolled out in the UK. All these schemes have the same common goal but with varying rules being applied.
Aside from the short term uncertainties mentioned earlier, another issued commonly faced by expatriates is a build up of numerous pension pots in different jurisdictions.
Structures, such as Qualifying Recognised Overseas Pensions Schemes (QROPS) which allow pensions to be transferred outside the UK, have their place and are definitely an advancement in flexibility afforded to UK expats, but are not suitable for everyone.
For many years now there has been talk of international pension schemes, yet still nothing has developed that lends itself to an even playing field for the international worker.
Despite the globe becoming more accessible and more individuals working internationally we don’t see anything being developed for some time as governments are currently too busy trying to sort out their own domestic pension issues.
The generation behind us are being educated of the retirement issues and will be wise to the fact that they need to take heed and make provisions for their retirement.
Our generation is still sitting on the time bomb and needs to take control quickly to minimise the aftershock.
At Guardian Wealth Management we have expert professional financial planners who can help you achieve your saving and retirement goals, so don’t delay contact us today or visit the website for more beneficial saving information.